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Assume the following information: Spot rate: CHF/USD -0.7142 90-day forward rate: CHF/USD -0.7114 USD 90-day interest rate: 3.75% (APR) CHF 90-day interest rate: 5.33% (APR) The option data for July contracts is given the table below Strike price (CHF/USD) Call Premium Put Premium 0.70 2.55e per CHF 1.42 per CHF 0.72 1.550 per CHF 2.4. per CHF e 1.U.S. Company ABC, which exports to Switzerland, expects to receive CHF 450,000 in 90 days. Should Com ABC se currency derivatives to ha which derivatives should Company ABC ? Please use a contingency graph to support your choices and computation. If so, please explain why (20 p 2. U.S. Company XYZ, which imports Swiss Watches, seeds to pay CHF 750,000 in 90 days. Should Company XYZ Currency derivatives the which derivatives should Company XYZ use? Please use a contingency graph to support your choices and computation. If please explains why (20 points Note that the time to pay option premium and time to exchange currencies are different. Please account for the opportunity costs profite p remium Part 1: Managing Transaction 1. Exposures Assume the following information: o Spot rate: CHF/USD = 0.7142 o 90-day forward rate: CHF/USD = 0.7114 USD 90-day interest rate: 3.75% (APR) CHF 90-day interest rate: 5.33% (APR) The option data for July contracts is given the table below. Strike price Call Put (CHF/USD) Premium Premium 2.55 per 1.42 per 0.70 CHF CHF 0.72 1.55 per 2.4 per CHF CHF 1. U.S. Company ABC, which exports to Switzerland, expects to receive CHF 450,000 in 90 days. Should Company ABC use currency derivatives to hedge transaction risk? If yes, which derivatives should Company ABC use? Please use a contingency graph to support your choices and computation. If no, please explain why (20 points). 2. U.S. Company XYZ, which imports Swiss watches, needs to pay CHF 750,000 in 90 days. Should Company XYZ use currency derivatives to hedge transaction risk? If yes, which derivatives should Company XYZ use? Please use a contingency graph to support your choices and computation. If no, please explain why (20 points). Note that the time to pay option premium and time to exchange currencies are different. Please account for the opportunity costs/profit (time value of option premium). Assume the following information: Spot rate: CHF/USD -0.7142 90-day forward rate: CHF/USD -0.7114 USD 90-day interest rate: 3.75% (APR) CHF 90-day interest rate: 5.33% (APR) The option data for July contracts is given the table below Strike price (CHF/USD) Call Premium Put Premium 0.70 2.55e per CHF 1.42 per CHF 0.72 1.550 per CHF 2.4. per CHF e 1.U.S. Company ABC, which exports to Switzerland, expects to receive CHF 450,000 in 90 days. Should Com ABC se currency derivatives to ha which derivatives should Company ABC ? Please use a contingency graph to support your choices and computation. If so, please explain why (20 p 2. U.S. Company XYZ, which imports Swiss Watches, seeds to pay CHF 750,000 in 90 days. Should Company XYZ Currency derivatives the which derivatives should Company XYZ use? Please use a contingency graph to support your choices and computation. If please explains why (20 points Note that the time to pay option premium and time to exchange currencies are different. Please account for the opportunity costs profite p remium Part 1: Managing Transaction 1. Exposures Assume the following information: o Spot rate: CHF/USD = 0.7142 o 90-day forward rate: CHF/USD = 0.7114 USD 90-day interest rate: 3.75% (APR) CHF 90-day interest rate: 5.33% (APR) The option data for July contracts is given the table below. Strike price Call Put (CHF/USD) Premium Premium 2.55 per 1.42 per 0.70 CHF CHF 0.72 1.55 per 2.4 per CHF CHF 1. U.S. Company ABC, which exports to Switzerland, expects to receive CHF 450,000 in 90 days. Should Company ABC use currency derivatives to hedge transaction risk? If yes, which derivatives should Company ABC use? Please use a contingency graph to support your choices and computation. If no, please explain why (20 points). 2. U.S. Company XYZ, which imports Swiss watches, needs to pay CHF 750,000 in 90 days. Should Company XYZ use currency derivatives to hedge transaction risk? If yes, which derivatives should Company XYZ use? Please use a contingency graph to support your choices and computation. If no, please explain why (20 points). Note that the time to pay option premium and time to exchange currencies are different. Please account for the opportunity costs/profit (time value of option premium)

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