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You plan to visit Geneva, Switzerland, in three months to attend an international business conference. You expect to incur a total cost of SF5,800 for

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You plan to visit Geneva, Switzerland, in three months to attend an international business conference. You expect to incur a total cost of SF5,800 for lodging, meals, and transportation during your stay. As of today, the spot exchange rate is $0.60/SF and the three-month forward rate is $0.67/SF. You can buy the three-month call option on SF with an exercise price of $0.68/SF for the premium of $0.05 per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 6 percent per annum in the United States and 4 percent per annum in Switzerland. a. Calculate your expected dollar cost of buying SF5,800 if you choose to hedge by a call option on SF. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Total expected cost b. Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract. Future dollar cost c. At what future spot exchange rate will you be indifferent between the forward and option market hedges? (Do not round intermediate calculations. Round your answer to 5 decimal places.) Future spot exchange rate

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