Assume interest rates are 6% and 8% (annualized) on US dollars and Swiss francs, respectively.  Further, the spot rate for the Swiss Franc is SFr1 = $1.10.

 a. What is the six-month forward exchange rate for the Swiss franc?  Please take all currency calculations out to four decimal places.

 

b. Suppose your company needs to purchase 12 high-tech precision drill presses from a Swiss manufacturer for SFr85,000 each. Your firm will purchase five presses today at the spot exchange rate and the remaining seven presses in six months at the forward rate you found. What will be the total cost of the 12 presses? 

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