Question 2 (10 marks) A French investor based in Sweden, expects the U.S. dollar to depreciate by 5% over the next year. The interest rate on one-year risk-free bonds is 3.5% in the United States, and 2.75% in Sweden. The current exchange rate is SEK 6.35 per U.S. dollar. You buy some U.S. stocks with an expected return of 8% in dollars. Answer all the questions from the investor's point of view. 1 (a) Calculate the foreign currency risk premium (2 mark) (b) Calculate the expected return on the U.S. stock in Swedish krona. (2 mark) (c) Calculate the risk premium on the U.S. stock from a U.S. investor's viewpoint and from the Swedish investor's viewpoint. (3 marks) (d) Calculate the expected return on the U.S. stock from the French investor's viewpoint, assuming that the French investor hedges the currency risk. Calculate the risk premium on the hedged U.S. stock from the French iny's viewpoint