Your firm is a Swiss importer of bicycles. You have placed an order with an Italian firm for €1,000,000 worth of bicycles. Payment (in euro) is due in 12 months. Use a money market hedge to redenominate this one-year receivable into a Swiss franc-denominated receivable with a one-year maturity.

Contract Size			Country	U.S. $ equiv.				Currency per U.S. $
£	10,000		Britain (pound)	$	1.9600			£	0.5102			interest				APR
			12 months forward	$	2.0000			£	0.5000			rates
€	10,000		Euro	$	1.5600			€	0.6410				i$		=		1	%
			12 months forward	$	1.6000			€	0.6250				i€		=		2	%
SFr.	10,000		Swiss franc	$	0.9200			SFr.	1.0870				i£		=		3	%
			12 months forward	$	1.0000			SFr.	1.0000				iSFr.		=		4	%

The following were computed without rounding. Select the answer closest to yours.

Multiple Choice

• SFr. 1,544,705.88

• SFr. 1,600,000

• SFr. 800,000

• SFr. 1,728,900.26

Answer rating: 100% (QA)

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