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You plan to visit Geneva, Switzerland in three months to attend an international business conference. You expect to incur the total cost of SF 5,000
You plan to visit Geneva, Switzerland in three months to attend an international business conference. You expect to incur the total cost of SF 5,000 for lodging, meals and transportation during your stay. As of today, suppose you face the following exchange rate, interest rate and option price. Assume that your expected future spot exchange rate is the same as the forward rate (F=S_T). Calculate your expected dollar cost of buying SF5.000 if you choose to hedge via call option on SFCalculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract. At what future spot exchange rate (i.e. break-even spot exchange rate) will you be indifferent between the forward and option market hedges
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