Sweet Ltd is a British importer of chips. The company has contracted to purchase 5,000 units of chips at a unit price of 30 Swiss Franc from one Swiss company. Three month's credit is allowed to Sweet Ltd before payment is due. Sweet Ltd currently has no cash surplus, but can borrow short term at 2% above the bank base rate or invest short term at the base rate in either the United Kingdom or Switzerland.

Exchange rates Swiss franc/Pound

• Spot 2.990-3.020
• 1 month forward 2.975-3.005
• 3 months forward 2.945-2.965

Current Bank Base rates:

• Switzerland 6% per annum
• United Kingdom 10% per annum

Sweet Ltd has a 3-month call option on Swiss Franc at an exercise price of 2.930 Swiss Franc per Pound with 1% premium and a 3-month put option on Swiss Franc at an exercise price of 2.930 Swiss Franc per Pound with a 2.5% premium. Assume Sweet Ltd's cost of capital is 10%. Calculate the cost of hedging using OPTIONS HEDGE AND MONEY MARKET HEDGE