Question: Use for Math 1 and 2: Spot Rate 1.050 - 51 Sf/E Forward ( 6 month ) 1.060-61 Sf/E Swiss Rates(annualized) Invest / Borrow8% /

Use for Math 1 and 2:

Spot Rate 1.050 - 51 Sf/E

Forward (6 month) 1.060-61 Sf/E

Swiss Rates(annualized) Invest / Borrow8% / 10%

Euro Rates (annualized) Invest / Borrow4% / 6.00%

1. Renault is a European importer who wants to hedge 300,000 sf exposure. Hedge it using the forward rate hedge, and the money market hedge.

2. If I was interested in buying either Swiss or Euro Tbills for an investment, Which should I choose. (hint: think covered interest arbitrage. There are 4 answers)

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