Interest rate in US (Rh):	3.5%
Interest rate in Euro zone (Rh):	7.5%
Line of credit in US:	USD 10,000,000
Line of credit in in Euro zone:	EUR 8,000,000
The spot rate of EUR, now (SR0):	$1.25

Suppose your forecast tells you that the spot rate of EUR one year later (SR1) will be $1.20. What is your uncovered rate of return from US (Ruh) and Euro zone (Ruf)?

correct answer

(US): 3.20%

EURo zone :7.81%