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The current spot rate CHF/USD = 0.70 and Swiss francs would depreciate against USD Viner Co. will receive 200,000 Swiss francs in 6 months 1.
The current spot rate CHF/USD = 0.70 and Swiss francs would depreciate against USD
Viner Co. will receive 200,000 Swiss francs in 6 months
1. If the forward rate is CHF/USD = 0.72 now, how much will Viner receive in dollars in 6 months according to the forward hedging? 2. Assume now the 6-month U.S. interest rate is 4% and the 6-month euro interest rate is 4.5%. Suppose now the current spot rate is CHF/USD = 0.73. How much will Viner receive in dollars in 6 months according to the money market hedging? 3. Assume now the put option has an exercise price of CHF/USD = 0.74 with a premium of $0.04. If the prediction of the spot rate in a year is as shown in the table below, how much will Viner receive in dollars in 6 months according to the option hedging? 4. Which hedging technique is optimal for Viner Co. now? 5. Should Viner Co. use the optimal hedging technique to hedge payables? Scenario The spot rate in a year Probability 1 0.71 60% 2 0.75 40%Step by Step Solution
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