PLEASE ANSWER THE FOLLOWING PROBLEMS WITH STEPS.

1.... You are a U.S. exporter concerned about your transaction exposure on a recent sale to an importer in Germany. The invoice, just sent, is for 500,000 euros payable in 60 days, which will be about mid-February. The current exchange rate is $1.00 per euro, and you fear that the dollar will appreciate against the euro due to the rebound in the domestic economy and the improvement in the economy with potentially increasing interest rates. The 60-day forward rate is $.99.

a)What is the value of the invoice in dollars at the current spot rate?

b)If a forward contract is sold, what will be the value of the invoice in dollars at the forward rate?

c)What are the advantages and disadvantages of hedging the transaction with a forward contract?

2.... You recently sold some goods to an importer in Switzerland and, during the negotiations, you agreed to invoice the goods in francs, knowing that you will need to convert the francs to dollars upon receipt. The current exchange rate is $.60 per franc, and the invoice will be for 250,000 francs. Payment is due in 60 days. You decide to hedge your exposure using futures contracts.

a)How many futures contracts will you need?

b)Will you buy hedge or a sell hedge?

c)What will your spot market position be if the spot exchange rate is $.70 in 60 days?

3..... A treasury manager is assessing the annual performance of the firm's short-term investment portfolio. The beginning value of the portfolio was $5,200,000. At year-end, the portfolio was valued at $5,350,000. No investments were purchased over the year as revenues and cash flows dropped, which made it difficult to accumulate additional cash holdings.

a)What is the annual rate of return on the short-term investment portfolio?

b)What would the annual rate of return be if the ending value equaled $5,100,000?