A Swiss investor has purchased a U.S. Treasury bond priced at 100. Its yield is 4.5 percent,

Question:

A Swiss investor has purchased a U.S. Treasury bond priced at 100. Its yield is 4.5 percent, and the investor expects the U.S. yields to move down by 15 basis points over the year. The duration of the bond is 6. The Swiss franc cash rate is 1 percent and the dollar cash rate is 2 percent. The one-year forward is SFr 1.4600 per $.
a. The Swiss investor has come up with his own model to forecast the SFr per $ one year ahead. This model forecasts the one-year ahead to be SFr 1.3500 per $. Based on this forecast, should the Swiss investor hedge the currency risk of his investment using a forward contract?
b. If the Swiss investor decides to hedge using a forward contract, give a rough estimate of his expected return.
c. Verify for the hedged investment that the risk premium in Swiss francs is the same as the risk premium on the same U.S. Treasury bond for a U.S. investor.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...