Question: U.S. deposit rate for 1 year = 11.5% U.S. borrowing rate for 1 year = 12% Swiss deposit rate for 1 year = 9% Swiss
| U.S. deposit rate for 1 year | = | 11.5% |
| U.S. borrowing rate for 1 year | = | 12% |
| Swiss deposit rate for 1 year | = | 9% |
| Swiss borrowing rate for 1 year | = | 10% |
| Swiss forward rate for 1 year | = | $.40 |
| Swiss franc spot rate | = | $.39 |
Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF700, 000 in 1 year. Suppose you have money market and forward hedge opportunities available.
a. (5 pts.) If you hedge using money market, what will be the approximate value of your exports in 1 year in U.S dollars?
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