You plan to visit Basel, Switzerland, in three months to attend an international business conference. You expect to incur a total cost of CHF 8,400 for lodging, meals, and transportation during your stay. As of today, the spot exchange rate is USD0.60/CHF and the three-month forward rate is USD0.8000/CHF. You can buy the three-month call option on CHF with an exercise price of USD0.8100/CHF for the premium of USD0.05 per CHF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 8 percent per annum in the United States and 5 percent per annum in Switzerland. 1. Calculate your expected dollar cost of buying CHF 8,400 if you choose to hedge by a call option on CHF. (Round your final answer to 2 decimal places)

2. Calculate the future dollar cost of meeting this CHF obligation if you decide to hedge using a forward contract.

3. At what future spot exchange rate will you be indifferent between the forward and option market hedges? (Round your final answer to 5 decimal places)