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A U.S.-based importer, Zarb, invests $1000 in a risk-free 180-day Switzerland bond with a 4% annual Swiss francs return. He plans to lock in the
A U.S.-based importer, Zarb, invests $1000 in a risk-free 180-day Switzerland bond with a 4% annual Swiss francs return. He plans to lock in the dollar return by selling the Swiss francs in the forward market. Assume that the spot exchange rate is 1.66 Swiss francs per dollar and the 180-day forward exchange rate is 0.6 dollar per Swiss francs. What's the expected annual dollar return?
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