Assume the Following Information: U

question 41

Multiple Choice

Assume the following information: U.S. deposit rate for 1 year
=
11%
US. borrowing rate for 1 year
=
12%
Swiss deposit rate for 1 year
=
8%
Swiss borrowing rate for 1 year
=
10%
Swiss forward rate for 1 year
=
$) 40
Swiss franc spot rate
=
$) 39
​
Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF600,000 in 1 year.
​
Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a forward hedge?

• A) $234,000
• B) $238,584
• C) $240,000
• D) $236,127

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Definitions:

Four-Firm Sales Concentration Ratio

A measure indicating the total market share of the four largest firms within an industry, used to assess the level of market competition.

Geographic Concentration

The phenomenon where certain industries or businesses are clustered in specific regions, often due to advantages like resources or skilled labor.

X-Inefficiency

X-Inefficiency occurs when a firm fails to use its resources efficiently due to a lack of competitive pressure.

Differentiated Oligopoly

A market structure in which a few firms dominate the market by selling products that are distinct yet somewhat substitutable, focusing on product differentiation to maintain competitive advantage.