A US Based Corporation A US-based corporation has decided to make an investment in Sweden, for which it will require a sum of 100 million Swedish kronor (SEK) in three-months’ time. The company wishes to hedge changes in the US dollar (USD)-SEK exchange rate using forward contracts on either the euro (EUR) or the Swiss franc (CHF) and has made the following estimates: 
• If EUR forwards are used: The standard deviation of quarterly changes in the
USD/SEK spot exchange rate is 0.007, the standard deviation of quarterly changes.
in the USD/EUR forward rate is 0.018, and the correlation between the changes is.
0.90.
• If CHF forwards are used: The standard deviation of quarterly changes in the
USD/SEK spot exchange rate is 0.007, the standard deviation of quarterly changes.
in the USD/CHF forward rate is 0.023, and the correlation between the changes is.
0.85.
Finally, the current USD/SEK spot rate is 0.104, the current three-month USD/EUR
forward rate is 0.471, and the current three-month USD/CHF forward rate is 0.602.
(a) Which currency should the company use for hedging purposes?
(b) What is the minimum-variance hedge position? Indicate if this is to be a long or
short position. Silver Price 9. The spot price of silver is currently $7.125/oz, while the two- and five-month forward
prices are $7.160/oz and $7.220/oz, respectively.
(a) If silver has no convenience yield what are the implied repo rates?
(b) Suppose silver has an active lease market with lease rate = 0.5% for all maturities
expressed in annualized continously compounded terms. Using the formula developed
in Question 3, identify the implied repo rate for maturities of two months and
five months.
(a) Which currency should the company use for hedging purposes?
(b) What is the minimum-variance hedge position? Indicate if this is to be a long or
short position. Silver Price 9. The spot price of silver is currently $7.125/oz, while the two- and five-month forward
prices are $7.160/oz and $7.220/oz, respectively.
(a) If silver has no convenience yield, what are the implied repo rates?
(b) Suppose silver has an active lease market with lease rate = 0.5% for all maturities
expressed in annualized continously compounded terms. Using the formula developed
in Question 3, identify the implied repo rate for maturities of two months and
five months. Use APA referencing style.