Assume the Following Information Also Assume That a U

question 49

Multiple Choice

Assume the following information:
$\begin{array}{llr}\text { U.S. deposit rate for } 1 \text { year } & = & 11 \% \\\text { U.S. borrowing rate for } 1 \text { year } & = & 12 \% \\\text { Swiss deposit rate for } 1 \text { year } & = & 8 \% \\\text { Swiss borrowing rate for 1 year } & = & 10 \% \\\text { Swiss forward rate for } 1 \text { year } & = & \$ .40 \\\text { Swiss franc spot rate } & = & \$ .39\end{array}$
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:

Wechsler Scale

A set of standardized tests used to assess the intelligence of children and adults, taking both verbal and performance IQ into account.

Heuristics

Mental shortcuts or rules of thumb that simplify decision making, often leading to a speedy decision but not always to the best outcome.

Infinite Creativity

The boundless capacity to generate novel and original ideas, concepts, or artistic expressions.

Regularization

The process in language learning where irregular forms are mistakenly made regular by applying standard rules, often seen in child language acquisition.