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Question 15: Assume that the one-year interest rates for USD and CHF are: PUSD = 5% and CHF = 2% and that the expected spot r

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Answer #1

Expected Spot rate at t1 - 1.12 USD per CHF

As per UIRP

1+USInterest Rate Forward Rate = Spot Rate* G 1+ Swiss Interest Rate

1.12 = Spot Rate * 1+0.05 1 + 0.02

Spot Rate = 1.12/ 1.0294117647

Sport rate = 1.088 USD / CHF

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