Assume that the current spot rate of the Swiss Franc (currency of Switzerland) is $0.62 US dollars (USD). American sports footwear and apparel company New Balance has purchased a 90-day forward contract at a rate of $0.66. For the US company, does the forward contract exhibit a premium or discount and by how much? You must show all calculations and identify whether the contract presents a premium or a discount) (5 pts). B. Assume that the company New Balance acquired the forward contract to "hedge" the exchange rate fluctuation and pay an outstanding invoice of 1,000,000 Swiss francs to the sports footwear and apparel company On (On Cloud) within 90 days. Assume that, after 90 days, the current spot rate of the Swiss Franc (currency of Switzerland) is $0.68 US dollars (USD).

REQUIRED

 Estimate the profit or loss that the forward contract represents for the New Balance company to pay the invoice to the Swiss company.

Answer rating: 100% (QA)

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