You are going to be paid 500,000 CHF (Swiss francs) in one year, but you would prefer
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Question:
You are going to be paid 500,000 CHF (Swiss francs) in one year, but you would prefer dollars. If you wish to hedge your exchange rate risk on this transaction using a forward market hedge, how many Swiss francs should you borrow (or lend) today to set up your hedge? The current exchange rate is $1.004 per CHF, the one year spot rate is $0.904 per CHF, and your dollar cost of debt is 6.5%. Represent borrowing as positive numbers, lending as negative numbers.
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