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Foreign Exchange Risk Management: Electronix, Inc., of Seattle, Washington, sold internet protocol systems to a Swiss corporation for SF2,000,000 with payment due in three months.

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Foreign Exchange Risk Management: Electronix, Inc., of Seattle, Washington, sold internet protocol systems to a Swiss corporation for SF2,000,000 with payment due in three months. The following quotes are available: Three-month interest rate (borrowing or investing) on U.S. dollars: 6.00% per annum Three-month interest rate (borrowing or investing) on Swiss francs: 8.00% per annum Spot exchange rate: SF1.60001$ Three-month forecasted spot exchange rate: SF1.6000/5 Three-month forward exchange rate: SF1.612078 Three-month options from Bank of America: Call option on SF2,000,000 at exercise price of SF1.6000/$ and a 1% premium Put option on SF2,000,000 at exercise price of SF1.6000/$ and a 3% premium What are the costs and benefits of the following alternatives: leaving it open, forward market hedge, money market hedge and option market hedge? Which is the best alternative? (Hint: You need to consider the interest cost of the option premium. You also need to calculate the expected cash flows if there is no hedging, Please type in the following box)

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