Assume the U.S. MNC can borrow funds in Swiss francs at a rate of 3% over a 6-month period. The amount it should borrow so that it can use all of its receivables to repay the entire loan in 6 months is:
The MNC can convert the francs that it borrowed into dollars. Assume the spot rate is currently $.70. It will receive:
If the firm doesn’t need the dollars, it can invest them in the money market at 2% over a 6-month period. The investment will be worth: