1.
1-year forward exchange rate (in USD per EUR) = Spot rate * (1 + U.S yield) / (1 + Euro yield)
= $1.3 * (1 + 3.7%) / (2.6%)
= $1.3 * (1.037 / 1.026)
= $1.3 * 1.010721248
= 1.31 USD per EUR
1-year forward exchange rate (in USD per EUR) = 1.31 USD per
EUR
2.
2-year forward exchange rate (in USD per EUR) = Spot rate * (1 + U.S yield)^2 / (1 + Euro yield)^2
= $1.3 * (1 + 3.7%)^2 / (2.6%)^2
= $1.3 * 1.021557
= 1.33 USD per EUR
2-year forward exchange rate (in USD per EUR) = 1.33 USD per EUR
3.
Swap rate = Spot rate * (1 + U.S yield)^2 / (1 + Euro yield)^2
= $1.3 * (1 + 3.7%)^2 / (2.6%)^2
= $1.3 * 1.021557
= 1.33 USD per EUR
Swap rate = 1.33 USD per EUR
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