Forward rate for french franc


Would someone please provide me with a step by step solution for the following problem?

A U.S. corporation, Forever Young, Inc., intends to import $1,000,000 worth of cosmetics from Switzerland and will make payment in SF three months from now.The foreign exchange spot rate of Swiss franc to the U.S. dollar is SF6/$. Annual interest rates for U.S. dollar and Swiss franc are 5 percent and 8 percent, respectively.

Q1. What is the three-month forward rate for French franc if interest-rate parity holds?

Q2. How can Forever Young, Inc., use currency trading to hedge against the foreign exchange risk associated with the purchase?

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Finance Basics: Forward rate for french franc
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