QUESTION 1

1. Assume the following information:

   U.S. deposit rate for 1 year	=	11%
   U.S. borrowing rate for 1 year	=	12%
   Swiss deposit rate for 1 year	=	8%
   Swiss borrowing rate for 1 year	=	10%
   Swiss forward rate for 1 year	=	$.40
   Swiss franc spot rate	=	$.39

   Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF600,000 in 1 year.

   Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a forward hedge?

   	a.	$236,127
   	b.	$238,584
   	c.	$240,000
   	d.	$234,000

1.5 points

QUESTION 2

1. Spears Co. will receive SF1,000,000 in 30 days. Use the following information to determine the total dollar amount received (after accounting for the option premium) if the firm purchases and exercises a put option:

   Exercise price	=	$.61
   Premium	=	$.02
   Spot rate	=	$.60
   Expected spot rate in 30 days	=	$.56
   30-day forward rate	=	$.62

   	a.	$600,000
   	b.	$630,000
   	c.	$590,000
   	d.	$610,000

1.5 points

QUESTION 3

1. Assume that Parker Co. will receive SF200,000 in 360 days. Assume the following interest rates:

   	U.S.	Switzerland
   360-day borrowing rate	7%	5%
   360-day deposit rate	6%	4%

   Assume the forward rate of the Swiss franc is $.50 and the spot rate of the Swiss franc is $.48. If Parker Co. uses a money market hedge, it will receive ____ in 360 days.

   	a.	$101,923
   	b.	$96,914
   	c.	$98,769
   	d.	$101,904