Question # 1

The first two stories are about speculators in the Swiss Franc who were burnt by
the rise in the currency. What lessons, if any, can you draw from them investing?
1. Do not be overconfident on things you cannot predict.
2. Investment in the peg currency is difficult.
3. Hedge fund manager make new rules for investing in peg currency, so that losses are
minimized.
4. Swiss National bank take corrective measures to minimizes losses and maintain GDP
rate.
5. Risk cannot be eliminated.

Question # 2

The next two stories are about mismatches in currencies between cash inflows and
outflows, covering individuals, municipalities, traders and corporations. What
lessons, if any, can you draw from these stories?
1. Revenues and expenses must be in same currency.
2. Loan financing must be in same currency.
3. Implement subjective and objective approach while investing( fundamental and technical
analysis)

Question # 3

What general corporate finance lessons can you draw for individuals, investors and
businesses?
1. Use the first theme of corporate finance which is common sense.
2. Implement the concept of Markowitz concept of portfolio diversification.
3. Tax authorities are also made some rules considering the pegging.

Conclusion

The result of whole story is that Switzerland will suffer in the long run and occur
foreign direct investment outflow.

Assignment