hi. i have a doubt with 3 problems. Which are:

1. (MANDATORY) Moving Capital. Assume that the following quotes and interest rates between the Canadian Dollar and the Swiss Franc are given as follows. Further assume that the initial investment is equivalent to SF1,000,000: S: SF0.8300/C$ F-3: SF0.8335/C$ Three-month bonds in Canada: 4% annual Three-month bonds in Switzerland: 6% annual a) Tell whether there are covered interest opportunities between these currencies, and how much you can earn. b) Give a "consistent" explanation about the direction in which interest rates and exchange rates would have to adjust to recover exchange rate parity. c) If a speculator believes that the spot rate between the Swiss Franc and the Canadian Dollar in three months will be SF0.8200/C$, tell how to conduct such speculation and tell the possible risk. Remember that you have today the equivalent of SF1,000,000 to speculate. d) If a speculator believes that the spot quotation of the Swiss Franc and the Canadian Dollar will be SF0.8425 in three months, tell how to conduct such speculation, and mention the possible risk. You also have today the equivalent to SF1,000,000 to speculate.

2. (MANDATORY) Speculating with call options. Horst Schmidt is considering buying ten call options on British pounds on the Philadelphia Stock Exchange at a strike price of US$1.5160/. The contract size is 62,500, expiring in three months. The premium is 6.5 cents per pounds, ignoring brokerage costs. The spot rate is currently US$1.5125/ and the three-month forward rate is $1.5825/. Horst Schmidt believes that the most likely interval for the pound in three months will be in the range of US$1.4900/ and US$1.6200/, with the most likely value at US1$.5900/. a. Draw the diagram of the profit and loss position as perceived by Horst Schmidt. b. Calculate how much they think they will gain or lose at the expected range of future spot prices and at the most expected future spot price. c. Calculate and show on the diagram the breakeven future spot price. d. Given the same information of the last question, calculate and diagram the corresponding profit, loss, and breakeven positions for the writer (seller) of the ten call options to be purchased by this firm.

3. (MANDATORY) Triangular arbitrage. You have the equivalent to 240,000,000 and the following spot quotes: Japan Ex-Im Bank: 156.27/ Citibank: 142.35/US$ Deutsche Bank: US$1.0650/ a. Design a proper triangular arbitrage that is able to provide you with profits and DRAW your results. Be clear on what do you have to buy and/or sell. b. How do you think is this process going to end if it continues to provide profits? In other words, how do you think are financial markets going to adjust for this arbitrage opportunity.

4. (OPTIONAL) Hedging alternatives. Korean Airlines (KAL) has signed a contract with McDonnell Douglas to buy two airline jets, with a total value of US$90,000,000, and two equal payments. The first payment of US$45,000,000 was upfront, and the next US$45,000,000 must be paid in three months. KAL has extra cash for KrW38,000,000,000 (South Korean Won) at the Seoul Bank, and is with these funds that KAL is planning to make the second payment. Spot exchange rate: KW 800/US$ Three-month forward rate: KW 795/US$ Korean interest rate (Three-months) 2.5% annual (for loans and savings) US interest rate (Three-months): 6% annual (for loans and savings) A call option for three months at the interbank market has a strike price of KRW 790/US$, with a premium of 0.5% payable at the moment of the option purchase. Financial advisors of KAL predict a spot exchange rate in three months of KrW 792/US$. How should KAL plan the second payment to McDonnell Douglas, if KALs objective is to maximize the amount of Wons in the bank after three months, and to hedge against any exchange rate fluctuation? In other words, what is the bes t hedging alternative in KRW and why would you recommend it? Be as detailed as possible.

5. (OPTIONAL) Hedging dividends. Pion Resorts is planning to receive BR67,000,000 (Brazilian Real) in dividends from its affiliates in Brazil, in three months. The current spot rate is BR3.2500/US$ and the three month forward rate is BR5.4875/US$. Economic conditions have deteriorated in Brazil, and inflation is hitting 4.5% per month. Current inflation in the United States is 1% per month. In response to these conditions, the Brazilian Central Bank is devaluing its currency once a month, according to a crawling peg.1 The Brazilian affiliate of Pion can take loans at 48% annual rates. What should Pion Resorts do regarding the reception of its dividends?