Question: Intro The current exchange rate between the dollar and the Swiss franc is $1.12 per franc. Interest rates are 3.4% in the U.S. and 5.2%
Intro The current exchange rate between the dollar and the Swiss franc is $1.12 per franc. Interest rates are 3.4% in the U.S. and 5.2% in Switzerland, for all maturities. The interest rates are quoted with continuous compounding. Part 1 Attempt 1/2 for 10 pts. What should be the forward price, i.e., the forward exchange rate, for delivery in 11 months (in dollars per franc)? 2+ decimals Submit Part 2 Attempt 1/1 If the actual forward price is $1.091 per franc, what could you do to benefit from this situation? Check all that apply: Borrow francs now and exchange them for dollars. Take a short position in the forward contract. Take a long position in the forward contract. Borrow dollars now and exchange them for francs. Save Part 3 3 Attempt 1/2 for 10 pts. What will be your profit in 11 months if you borrow 4 million francs now (in $)? 0+ decimals
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