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On January 15, 2015, the Swiss National Bank (SNB) removes the exchange rate cap and the

euro falls immediately to Fr1.00/€ and is expected to stay at around this level for the feasible

future. Assuming complete exchange rate pass-through, what is the relative price of Swiss

exports in the Eurozone?

Your answer: ___________________. (Keep two decimals.)

Assuming that the inflation rates in the Eurozone and in Switzerland have been 1.5% and

are expected to remain at 1.5% for the foreseeable future, what is the real exchange rates of

the Swiss franc after January 15, 2015?

Your answer: ___________________. (Keep two decimals.)

Assume that the subsidiary keeps sales price and cost per unit in Swiss franc unchanged and

the price elasticity of demand for the product in the Eurozone is 2. What is the PV of the

expected operating cash flows from the Swiss subsidiary after the exchange rate changed?

Your answer: €___________________. (Keep two decimals.)

Assume that the subsidiary chooses to price to market and keeps its sales price per unit in

euro unchanged, and everything else the same. What is the PV of the expected operating

cash flows from the Swiss subsidiary after the exchange rate changed?

Your answer: €___________________. (Keep two decimals.)

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