Suppose the spot exchange rate between Brazilian real and euros is . Calculate forward exchange rates at 1-year, 2-year, and 3-year horizons under these two scenarios.

a. Yield curves in euros and real are flat. Annual Eurocurrency interest rates are percent and percent for the next several years.

b. The euro yield curve is flat at percent per year.

Brazilian real interest rates are 5.5 percent per year at a 1-year horizon, 5.0 percent at a 2-year horizon, and 4.8 percent at a 3-year horizon.