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  3. 1. suppose on july 1st, 2003, porsche expected $1

1. Suppose on July 1st, 2003, Porsche expected $1 million sales from the U.S. at...

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1. Suppose on July 1st, 2003, Porsche expected $1 million sales from the U.S. at the end of July. On July 1st, 2003, the spot exchange rate was $1.13627, the 30-day forward exchange rate was $1.1400/, and the 60-day forward exchange rate was $1.1450/. Porsche predicted that by the end of July, the spot exchange rate would be $1.1390/ and The 30-day forward exchange rate would be $1. 1460/. Porsche also predicted that during August, 2003, the U.S. would have a monthly interest rate at 4% and inflation rate at 1%, while the Eurozone would have a monthly interest rate at 5% and inflation rate at 3%. Which of the following strategies will generate the most for Porsche at the end of August? (A)Porsche should convert the $1 million to right away at the end of July. (B) Porsche should hedge the $1 million sales through the 30-day forward contract on July 1st, 2003 (C) Porsche should hedge the $1 million sales through the 60-day forward contract on July 1st, 2003 (D)Porsche should hedge the $1 million sales through the 30-day forward contract on July 31st, 2003 2. Please explain the four stages of regional integration and the implications of each stage on member countries. 1

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