Spot transaction hedge/Money market hedge. There are three parts to this question. Answer all parts.
Question1) The Chicken Company, a company with headquarters in Switzerland, has a receivable of one million euro, which it will receive in one year. Chicken can borrow euro at the annual rate of 10%, can borrow Swiss francs at the annual rate of 9%, and could borrow dollars at the annual rate of 11%.
a) To complete spot transaction hedge, Chicken should first borrow what currency?
b) How much of that currency will Chicken borrow?
c) What currency will Chicken buy?
Explain your answer to part a. Explain or show how you calculate your answer to part b.