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  3. you plan to visit geneva, switzerland, in three mo

You plan to visit Geneva, Switzerland, in three months to attend an international business conference....

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Accounting

You plan to visit Geneva, Switzerland, in three months to attend an international business conference. You expect to incur a total cost of SF7,600 for lodging, meals, and transportation during your stay. As of today, the spot exchange rate is $0.60/SF and the three-month forward rate is $0.76/SF. You can buy the three-month call option on SF with an exercise price of $0.77/SF for the premium of $0.05 per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 8 percent per annum in the United States and 5 percent per annum in Switzerland.

a. Calculate your expected dollar cost of buying SF7,600 if you choose to hedge by a call option on SF. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract.

c. At what future spot exchange rate will you be indifferent between the forward and option market hedges? (Do not round intermediate calculations. Round your answer to 5 decimal places.)

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