D E 1 Question 6: 6 marks 2 Christoph Hoffeman of Kapinsky Capital Geneva now believes the Swiss franc will appreciate versus the U.S. dollar in 3 the coming three-month period. He has $100,000 to invest. The current spot rate is $0.5820 SF, the three-month 4 forward rate is $0.5640/SF, and he expects the spot rates to reach $0.6250 SF in three months. 5 6 a Calculate Christoph's expected profit assuming a pure spot market speculation strategy. (2 marks) 7 b. Calculate Christoph's expected profit assuming he buys or sells SF three months forward. (2 marks) 8 9 10 Assumptions 11 Initial investment (funds available) 12 Current spot rate (USS/Swiss franc) 13 Six-month forward rate (USS/Swiss franc) 14 Expected spot rate in six months (US$/Swiss franc) a. Values $100,000 S0.5820 $0.5640 $0.6250 b. Values $100,000 $0.5820 $0.5640 $0.6250