Assume that the spot exchange rate between the and the Swiss Franc (CHF) is E_/CHF = 0.98, the Eurozones annual interest rate is 3%, and the annual forward exchange rate between these two currencies is F_/CHF = 0.95.

a) Find the current Swiss interest rate that satisfies the covered interest-rate parity.

b) Suppose that the annual Swiss interest rate is the one you found in (a) and the Eurozone introduces (i) a tax t*=5.5% on the total amount of money that you receive from investing abroad, and (ii) a tax t=3.5% on the total amount of money that you receive from investing domestically. Find the new annual forward exchange rate F^*_/CHF that satisfies the covered interest-rate parity on an after-tax basis.