I would say C is the answer bc that’s would i would do in that situation.
Answer:
The spot rate in two years time = SF 12.99
Explanation:
The purchasing power parity states that the relationship between the current and future spot rate between two currencies can be linked to the differences in the expected inflation rate between the currency.
This relationship can be expressed as follows:
S1= So× (1 + hc)/(1 + hb)
So= Current spot rate, Hc- inflation rate in Switzerland, Inflation rate in Britain
Spot rate in a year's time
S1= 12.50, Hc=6%, Hc=4%
S1= 12.50× (1.06/1.04)
S1=12.74
Spot rate in two year's time
S1= 12.74× (1.06/1.04)
S1= 12.99
The spot rate in two years time = SF 12.99
Answer:
Being appreciated by people.
Answer:
Consumer Sentiment.
Disposable Income.
Residential Real Estate Market.
Oil / Gas Prices.
Labor Market and Wages.
Weather Data.
The Strength of the Dollar.
Raw Material Costs.
Explanation:
Answer:
a. U.S. Company should use a short forward contract to hedge currency risk.
b. $0.5931
c. A gain of $0.0456 is recognized by the company
Explanation:
a. As the company will receive settlement in Swiss francs in three months time, the currency risk is at the time of settlement receipt, Swiss francs will not be worth as much as it is expected against US dollar (or depreciated against USD). Thus, the company has to take the short position in forward contract to sell Swiss francs in three months time at predetermined rate.
b. We have F = S0 x ( 1+ USD rfr ) ^(90/365) / (1+ Swiss franc rfr) ^(90/365) = 0.5974 x 1.02^(90/365) / 1.05^(90/365) = $0.5931.
c. Value of the gain in the short position will be calculated at the time of 60-day-remaining to maturity as followed:
F at the beginning/ ( 1+ USD rfr) ^ (60/365) - Spot rate at the 60-day-remaining to maturity/ (1+ Swiss franc rfr) ^(90/365) = 0.5931/1.02^(60/365) - 0.55/1.05^(60/365) = $0.0456.
