The current exchange rate between the dollar and the Swiss franc is $1.14 per franc. Interest rates are 4% in the U.S. and 5% in Switzerland, for all maturities. The interest rates are quoted with continuous compounding. Part 1 - Attempt 1/4 for What should be the forward price, i.e., the forward exchange rate, for delivery in 3 months (in dollars per franc)? 2+ decimals Submit
The current exchange rate between the dollar and the Swiss franc is $1.14 per franc. Interest rates are 4% in the U.S. and 5% in Switzerland, for all maturities. The interest rates are quoted with continuous compounding. Part 1 - Attempt 1/4 for What should be the forward price, i.e., the forward exchange rate, for delivery in 3 months (in dollars per franc)? 2+ decimals Submit
Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates
Section: Chapter Questions
Problem 38QA
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Question
Transcribed Image Text:Intro
The current exchange rate between the dollar and the Swiss franc is $1.14 per
franc. Interest rates are 4% in the U.S. and 5% in Switzerland, for all maturities.
The interest rates are quoted with continuous compounding.
Part 1
* Attempt 1/4 for
What should be the forward price, i.e., the forward exchange rate, for delivery in 3
months (in dollars per franc)?
2+ decimals
Submit
Transcribed Image Text:Part 2
* Attempt 1/5 for 10 ps.
If the actual forward price is $1.126 per franc, what could you do to benefit from
this situation?
Check all that apply:
Borrow francs now and exchange them for dollars.
Take a long position in the forward contract.
Borrow dollars now and exchange them for francs.
Take a short position in the forward contract.
Submit
Part 3
* Attempt 1/4 for 10 pts.
What will be your profit in 3 months if you borrow 10 million francs now (in $)?
0+ decimals
Submit
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