7. In Greece, you can purchase a one-year 1,000 bond with a 4.66% return. Consider an investor in the U.S. who might be interested in purchasing the bond. Comparatively, a similar bond in the U.S. only offers a return of 1%. The current exchange rate is 1= $ 1.11.

1. Discuss changes to the exchange rate that will be advantageous or costly to the exporter.
2. Determine the percentage change in the exchange rate that will allow the investment to break even.
3. Suppose the euro to dollar exchange rate is trading at a forward premium of 2%. Is it worth covering the interest in the forward market? That is, is it worth locking in at the forward rate? Explain.
4. Calculate the net return for this investment if the forward contract is purchased
5. Suppose the euro to dollar exchange rate is trading at a forward discount of 3%. Is it worth locking in at the forward rate in this case? Explain.
6. Calculate the net return for this investment if the forward contract is purchased. Would the investor prefer a domestic bond in this case? Explain.