Gotohell buys and sells regularly with customers worldwide. Its home currency is the dollar. The firm expects to receive 1.2 million in 6 months time from a customer abroad.

Current exchange rates in the home country of Gotohell are:

Exchange rate : Euros Per dollar

Spot : 4.1780-4.2080

6-month forward : 4.2302- 4.2606

12-month forward : 4.2825-4.3132

Required:

a) Calculate the rate of forward discount of the euro on the 6-month forward exchange rate both for buying and selling rate.

b) If the interest rate in the home country of Gotohell is 4% per year, calculate the implied annual interest rate in the foreign customers country, using the mid-spot and the mid-twelve-month forward exchange rate.