Question
Consider a U.S.-based company that exports goods to Switzerland. The U.S. Company expects to receive payment on a shipment of goods in three months. Because
Consider a U.S.-based company that exports goods to Switzerland. The U.S. Company expects to receive payment on a shipment of goods in three months. Because the payment will be in Swiss francs, the U.S. Company wants to hedge against a decline in the value of the Swiss franc over the next three months. The U.S. risk-free rate is 2.7 percent, and the Swiss risk-free rate is 0.7 percent. Assume that interest rates are expected to remain fixed over the near future. The current USD/CHF rate is 1.1053. Calculate the price at which the U.S. Company could enter into a forward USD/CHF contract that expires in 90 days (X.XXXX)
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