Suppose that the one-year U.S.interest rate is 8% and the one-year Swiss interest rate is 10%.If the current spot rate is $1.50 per Swiss franc,what must the one-year forward rate $/SFr be according to the approximate covered interest parity?

Question

Quizplus · Accepted Answer

The approximate covered interest parity formula is F = S * (1 + i_d) / (1 + i_f), where F is the forward rate, S is the spot rate, i_d is the domestic interest rate, and i_f is the foreign interest rate. Plugging in the given values: F = 1.50 * (1 + 0.08) / (1 + 0.10) = 1.50 * 1.08 / 1.10 ≈ $1.47.

Suppose That the One-Year U