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Suppose that you are an investor based in Switzerland, and you expect the U.S. dollar to depreciate by 2.75 percent over the next year. The
Suppose that you are an investor based in Switzerland, and you expect the U.S. dollar to depreciate by 2.75 percent over the next year. The interest rate on one-year risk-free bonds is 5.25 percent in the United States and 2.75 percent in Switzerland. The current exchange rate is SFr1.62 per U.S. dollar. a. Calculate the foreign currency risk premium from the Swiss investor's viewpoint. b. Calculate the return on the U.S bond from the Swiss investor's viewpoint, assuming that the Swiss investor's expectations are met
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