1. The U.S. risk-free interest rate is 1.8% per year and the Swiss risk-free interest rate is 0.7% per year. If the spot exchange rate is SF1.65 per U.S. dollar and interest rate parity holds, what is the one-year forward exchange rate in francs per dollar?
1) SF0.85
2) SF1.44
3) SF0.74
4) SF0.61
5) SF1.63
2. The spot exchange rate is $1.51 per British pound. If the dollar appreciates by 10%, how many dollars would be required to buy a pound?
1) $1.359
2) $1.661
3) $1.564
4) $1.433
5) $1.711