How many dollars can park receive

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Assume that Parker Co will receive SF500,000 in 90 days. The 360 day borrowing and deposit rate in the U.S is 7% and 6%, respectively. The 360 day borrowing and deposit rate in Switzerland is 5% and 4%, respectively. Assume the forward rate of the Swiss rate of the Swiss franc is $0.05 and the spot rat of the Swiss franc is $0.48. If Parker Co. uses a money market hedge.

Problem a. How many SF does it borrow now?

Problem b. How many dollars can Park receive when it converts borrowed SF to dollar now?

Problem c. How many dollars will Park receive in 90 days if it uses money market hedge?

Problem d. How many dollars will Park receive in 90 days if it uses the forward hedge?

Problem e. In the previous question of Parker Co., the forward hedge is better than the money market hedge (True or False)?

Reference no: EM132885201

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