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2. On the Forex market, you observe the following hypothetical quotes: Spot $:= 108.65 One-year interest rate $ = 3% One-year interest rate = 6%

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2. On the Forex market, you observe the following hypothetical quotes: Spot $:= 108.65 One-year interest rate $ = 3% One-year interest rate = 6% What should be the quotes for the one-year forward exchange rate S: X? 3/4 3. The one-year risk-free interest rates are 5 percent in domestic currency and 4 percent in foreign currency. The expected exchange rate appreciation of foreign currency is 3 percent. What is the foreign currency risk premium

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