Consider the information presented here (all values are in US$):

a. Let E denote the spot exchange rate and F denotes the one-month forward rate. Derive the formula that shows how F is determined in the foreign-exchange market and how its value is related to E. Under what conditions in the real world is this formula most likely to hold?

b. Based on the information provided earlier, where (among the United States, Australia, or Switzerland) are one-month interest rates the highest? Where are they the lowest? How do you know?

c. Given the information, what is the Australian dollar price of 1 Swiss franc?

d. What is the Swiss franc price of 1 Australian dollar?

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Australia 0.50 30-day forward 0.49 Switzerland 0.25 30-day forward 0.26