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The Swiss one-year interest rate is 7 percent, while the U.S. one-year interest rate is 2 percent. Assume that interest rate parity exists. If a
The Swiss one-year interest rate is 7 percent, while the U.S. one-year interest rate is 2
percent. Assume that interest rate parity exists. If a U.S. firm invests in a Swiss one-year
deposit and sells Swiss francs forward with a forward contract to hedge its exchange
rate exposure, the effective yield from investing in a one-year deposit in Switzerland will
be about:
7%
none of the options listed
9%
2%
4%
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