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Money Market Hedge
Money Market Hedge
Money Market Hedge
Step 1:
We have to purchase present value of CHF 100,000 @ 3% deposit rate of the Switzerland. For that
borrow dollars and convert that at spot rate $0.48 per Swiss fiancé.
Therefore,
=100,000/1.03
=97087.37864 CHF
Step 2:
Borrow amount equal to dollar for CHF 97087.37864 at spot exchange rate.
= 97087.37864*0.48
= $46601.9417472
Step 3:
Borrow $46601.9417472 for 360 days @ US borrowing rate 7% .maturing amount after 360 days.
= 46601.9417472*(1+0.07)
= $49864.07767
= $49864.07767