Money and foreign exchange markets in Japan and Switzerland are quite efficient. You have the following information.
UK Switzerland
Spot exchange rate CHF1.52/BP BP0.6579/CHF
Expected inflation rate 1.5% p.a. 0.8% p.a.
Nominal interest rate Unknown 2.5% p.a.
(1) What is your estimate of the nominal interest rate in UK?
(2) What is your estimate of the one-year forward exchange rate between Swiss franc and British pound?