You plan to visit Geneva, Switzerland, in three months to attend an international business conference. You expect to incur a total cost of SF$8,800$ for lodging, meals, and transportation during your stay. As of today, the spot exchange rate is $$0\mathrm{.}60$ per swiss franc and the three$-$month forward rate is $$0\mathrm{.}82$ per swiss franc. You can buy the threemonth call option on SF with an exercise price of $$0\mathrm{.}83$ per swiss franc for the premium of $$0\mathrm{.}05$ per swiss franc. 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.

Required:

a$.$ Calculate your expected dollar cost of buying SF$8,800$ if you choose to hedge by a call option on SF$.$

b$.$ Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract.

c$.$ At what future spot exchange rate will you be indifferent between the forward and option market hedges?

Complete this question by entering your answers in the tabs below.

Required $A$

Calculate your expected dollar cost of buying SF$8,800$ if you choose to hedge by a call option Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

Total expected cost