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The following current rates have been observed: Spot exchange rate: $1.25/SFr Expected future spot rate in 90 days: $1.2625/SFr Annual interest rate on 90-day U.S.-dollar-denominated

The following current rates have been observed:

Spot exchange rate: $1.25/SFr

Expected future spot rate in 90 days: $1.2625/SFr

Annual interest rate on 90-day U.S.-dollar-denominated bonds: 10%

Annual interest rate on 90-day SFr-denominated bonds: 6%

(1) At these initial rates, does uncovered interest parity hold (if EUD has an absolute value less than 0.005, then we assume EUD=0.)? Why?

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