Business, 10.12.2019 06:31, leslychavez0269

The risk-free one-year interest rate in the swiss franc (chf) is 1.5%, while the risk-free one-year interest rate in the euro (eur) is 3.5%. the current spot exchange rate is chf 1.2000 (a) your swiss client (whose wealth and profits are in swiss francs) has an obligation of eur 10,000, six months from now. how can your client construct a money-market hedge, to fund this obligation without exchange-rate risk? assume your client can borrow and lend at the risk-free rate in both currencies. show that the strategy you propose is costless today and allows your client to meet his obligation at a fixed exchange rate that is known today. find that fixed exchange rate.

(b) you spot a six-month euro forward in the market that has a forward exchange rate of chf 1.2100 per eur. how can you make an arbitrage profit for your own firm in this case? ignore your client’s obligation from the previous part, and assume that your firm can also borrow and lend at the risk-free rate in both currencies, as well as buy or sell the euro forward.

(c) which parity relationship is violated by the forward contract in part 2b?

Answers: 2

Show answers

Other questions on the subject: Business

Business, 21.06.2019 18:30, srtero

Shareholders of tesla recently expressed concerns that elon musk should give up some of his power on tesla's board by appointing two independent directors. which of the following is not a reason why elon musk is perceived to have significant power over tesla's board? 1. he is the founder of the firm and a successful entrepreneur, thus board members may be hesitant to challenge him.2. as the ceo and chairman of the firm he can easily determine what the board should discuss and how it should vote on strategic issues.3. all board members, except for kimbal, have been appointed to the board during elon's tenure.4. many of the firm's directors are outsider investment managers whose interests would not be aligned with those of firms' shareholders.

Answers: 3

continue

Business, 22.06.2019 19:30, brianna218208

He moto hotel opened for business on may 1, 2017. here is its trial balance before adjustment on may 31. moto hotel trial balance may 31, 2017 debit credit cash $ 2,283 supplies 2,600 prepaid insurance 1,800 land 14,783 buildings 72,400 equipment 16,800 accounts payable $ 4,483 unearned rent revenue 3,300 mortgage payable 38,400 common stock 59,783 rent revenue 9,000 salaries and wages expense 3,000 utilities expense 800 advertising expense 500 $114,966 $114,966 other data: 1. insurance expires at the rate of $360 per month. 2. a count of supplies shows $1,050 of unused supplies on may 31. 3. (a) annual depreciation is $2,760 on the building. (b) annual depreciation is $2,160 on equipment. 4. the mortgage interest rate is 5%. (the mortgage was taken out on may 1.) 5. unearned rent of $2,580 has been earned. 6. salaries of $810 are accrued and unpaid at may 31

Answers: 2

continue

Business, 22.06.2019 21:20, isabelvaldez123

Which of the following best describes vertical integration? a. produce goods or services previously purchasedb. develop the ability to produce products that complement the original productc. develop the ability to produce the specified good more efficiently than befored. build long term partnerships with a few supplierse. sell products to a supplier or a distributor

Answers: 2

continue

Business, 22.06.2019 23:00, ehthaboe7265

Consider a consumer who is contemplating a new automobile purchase. she has narrowed her decision down to two brands, honda accord and ford taurus. she has identified gas mileage, price, warranty, and styling to be important attributes to consider in her decision

Answers: 1

continue

Do you know the correct answer?

The risk-free one-year interest rate in the swiss franc (chf) is 1.5%, while the risk-free one-year...