Suppose you observe an exchange rate of S($/SFr) = 0.85 (i.e., SFr 1 = $.85). The one-year forward rate is F1($/SFr) = 0.935 (i.e., SFr 1 = $.935). The annual interest rate is 5% in the U.S and 2% in Switzerland. A dollar-based investor can profit by borrowing ______, exchanging them for _____, investing in _____, and entering a one-year forward contract to _____.
a. Swiss francs; dollars; the US; sell dollars for Swiss francs
b. dollars; Swiss francs; Switzerland; buy Swiss francs with dollars
c. Swiss francs; dollars; the US; buy dollars with Swiss francs
d. dollars; Swiss francs; Switzerland; sell Swiss francs for dollars