The one-year interest rate on Swiss francs is 5 percent, and the dollar interest rate is 8
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The one-year interest rate on Swiss francs is 5 percent, and the dollar interest rate is 8 percent.
a. If the current \($/SF\) spot rate is \($0.60\) and uncovered interest rate parity holds in the market, what would you expect the spot rate to be in one year?
b. Suppose U.S. policy changes and leads to an expected future spot rate of \($0.63.\) What would you expect the dollar interest rate to be now? (Assume no change in the Swiss interest rate.)
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