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Suppose: Current spot rate of Euro (EUR) = $1.3543 Current 1-year forward rate for EUR = $1.2908 1-year Interest rate in the U.S. - 3.5%

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Suppose: Current spot rate of Euro (EUR) = $1.3543 Current 1-year forward rate for EUR = $1.2908 1-year Interest rate in the U.S. - 3.5% 1-year interest rate in the Euro Zone = 7.5% If you knew that the spot rate of EUR one year later would be $1.2975, then you should borrow in and invest in EUR:USD USD; EUR

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