comparison of hedging techniques you own a u s exporting firm and will receive 10 mi 1555551

Comparison of Hedging Techniques You own a U.S. exporting firm and will receive 10 million Swiss francs in 1 year. Assume that interest parity exists. Assume zero transaction costs. Today, the 1-year interest rate in the United States is 7 percent, and the 1-year interest rate in Switzerland is 9 percent. You believe that today’s spot rate of the Swiss franc (which is $.85) is the best predictor of the spot rate 1 year from now. You consider these alternatives:

 ■ hedge with 1-year forward contract,

 ■ hedge with a money market hedge,

 ■ hedge with at-the-money put options on Swiss francs with a 1-year expiration date, or

■ remain unhedged. Which alternative will generate the highest expected amount of dollars? If multiple alternatives are tied for generating the highest expected amount of dollars, list each of them.