Current one-year rates are 3% in Switzerland and 5% in USA. The current spot rate is...

Current one-year rates are 3% in Switzerland and 5% in USA. The current spot rate is 1.12 Sf/$.

What is the expected (in one year) future FX rate according to Interest Rate Parity? Use exact equation.
What is the synthetic one-year forward rate?
What is the market one-year forward rate?
How much is the one-year forward premium on the Swiss Franc?

Expert Solution

Answer is as follows:

jeff jeffy answered 2 years ago

Suppose that the current one-year rate (one-year spot rate) andexpected one-year T-bill rates over the...

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