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For the next three months, your US company wants to invest $25,000,000 in cash. T-Bills in the U.S. are paying 1.75% per annum and Swiss
For the next three months, your US company wants to invest $25,000,000 in cash. T-Bills in the U.S. are paying 1.75% per annum and Swiss Bills are paying 1.25% per annum. The spot rate is CHF 1.06950/$, and the three month forward exchange rate is CHF 1.05875/$. (30 points...show all calculations for maximum credit) A. Where should you invest to earn more and what is the net difference in earnings? (15 points) B. What is the equilibrium forward exchange rate that would make the Swiss earnings the same as the US? (15 points)
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