Massive Dynamique is a Geneva-based exporter of Swiss watches. Massive sold €1,000,000 worth watches

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Massive Dynamique is a Geneva-based exporter of Swiss watches. Massive sold €1,000,000 worth watches to a French retailer. Payment from the French firm (in euros) is due in 12 months. Use a money market hedge to redenominate this one-year receivable into a Swiss franc-denominated receivable with a one-year maturity. Select the answer closest to yours. Contract Size Country U.S. $ equiv. Currency per U.S. $ £ 10,000 Britain (pound) $ 1.9600 £ 0.5102 interest APR 12 months forward $ 2.0000 £ 0.5000 rates € 10,000 Euro $ 1.5600 € 0.6410 i$ = 1 % 12 months forward $ 1.6000 € 0.6250 i€ = 2 % SFr. 10,000 Swiss franc $ 0.9200 SFr. 1.0870 i£ = 3 % 12 months forward $ 1.0000 SFr. 1.0000 iSFr. = 4 %

Multiple Choice

SFr. 1,728,970

SFr. 1,544,706

SFr. 800,000

SFr. 1,600,000

SFr. 1,108,314

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