Calculate the foreign currency risk premium from the swiss, Financial Management

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Calculate the foreign currency risk premium from the swiss

Suppose that you are an investor based in Switzerland. You expect the $ to depreciate by 2.75% over the next year.

The interest rate on 1 year risk-free bond is 5.25% in the US and 2.75% in Switzerland.

The currenct exchange rate is SFr 1.62 per $

Calculate the foreign currency risk premium from the Swiss investor's perspective and explain.

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Financial Management: Calculate the foreign currency risk premium from the swiss

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