Business, 18.12.2019 23:31 cashkidd2200

Suppose that the us dollar interest rate and the swiss franc interest rate are the same, 5 percent per year, but that there is a risk premium of 1 percent associated with holding swiss franc rather than us dollars over the year. (a) what is the relationship (in percentage terms) between the current equilibrium dollar/franc exchange rate and its expected future level? (b) if the expected future exchange rate is $1.12 per franc, what is the equilibrium dollar/franc (spot) exchange rate? now suppose that the expected future exchange rate, $1.12 us per franc, remains constant as swiss's interest rate rises to 10 percent per year. (c) if the us interest rate also remains constant, what is the new equilibrium dollar/franc exchange rate?

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Suppose that the us dollar interest rate and the swiss franc interest rate are the same, 5 percent p...

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