Assume the Spot Exchange Rate for the Swiss Franc Is

question 22

Multiple Choice

Assume the spot exchange rate for the Swiss franc is $0.61/Sfr and the 1-year forward rate is $0.63/Sfr. If the 1-year interest rate in the U.S. is 5%, what is the 1-year interest rate in Switzerland?

• A) 2.00%
• B) 1.67%
• C) 1.50%
• D)1.33%

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Definitions:

Legal Capital

The minimum amount of capital that a corporation is required to maintain, as mandated by corporate laws, to protect creditors.

Dividends

Shareholders' receipts of payments from a corporation, generally tied to the distribution of earnings.

Incorporated

A legal process used to form a corporate entity or company, recognized separately from its owners with its own legal rights.

Capital Account

An account on a country's balance of payments that records all transactions involving the purchase or sale of assets.