Question 1 Not yet answered Points out of 5.00 Flag question A Swiss importer of bicycles has placed an order with an Italian firm for 1,000,000 worth of bicycles. The payment is due in 12 months. The interest rate is 4% per annum in Switzerland and 2% per annum in Italy. The current spot rate is SF1.6957/, and one-year forward rate is SF1.7/. Font size Paragraph Font family ELE BIU (1) Propose two hedging strategies for the Swiss importer. Specify action/transactions to take. Which hedging strategy would you recommend? Explain with calculations. (2) Other things being equal, at what forward rate would the Swiss importer be indifferent between the two hedging strategies you propose? (3) Suppose the Swiss importer has the choice of paying 1,000,000 or SF1,750,000. At what future spot rate will the Swiss importer choose to pay with EUR? If the spot rate turns out to be SF1.76/ in twelve months, what is the payment made by the Swiss importer? What is the best way to deal with its foreign currency exposure? Time left 1:59:36 Question 1 Not yet answered Points out of 5.00 Flag question A Swiss importer of bicycles has placed an order with an Italian firm for 1,000,000 worth of bicycles. The payment is due in 12 months. The interest rate is 4% per annum in Switzerland and 2% per annum in Italy. The current spot rate is SF1.6957/, and one-year forward rate is SF1.7/. Font size Paragraph Font family ELE BIU (1) Propose two hedging strategies for the Swiss importer. Specify action/transactions to take. Which hedging strategy would you recommend? Explain with calculations. (2) Other things being equal, at what forward rate would the Swiss importer be indifferent between the two hedging strategies you propose? (3) Suppose the Swiss importer has the choice of paying 1,000,000 or SF1,750,000. At what future spot rate will the Swiss importer choose to pay with EUR? If the spot rate turns out to be SF1.76/ in twelve months, what is the payment made by the Swiss importer? What is the best way to deal with its foreign currency exposure? Time left 1:59:36