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A Swiss franc is currently worth $0.70 US. If the U.S. returns 12 percent and the...

A Swiss franc is currently worth $0.70 US. If the U.S. returns 12 percent and the 90-day futures contract for the Swiss franc is $.721, what should be the return in Switzerland?

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Answer #1

We know that
Swiss rate=(Spot rate of 1 Swissfranc*(1+US rate*days/360)/Forward rate of 1 Swissfranc-1)*360/days
=>r=(0.70*(1+12%*90/360)/0.721-1)*(360/90)
=>r=0.00%

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