Interest rate parity in calculating the expected spot rates

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Reference no: EM131027038

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 18 million. The cash flows from the project would be sf 5.5 million per year for the next five years. The dollar required return is 15 percent per year, and the current exchange rate is sf 1.05. The going rate on euro dollars is 4 per center per year. It is 3 percent per year on euro Swiss. Use the approximate form of interest rate parity in calculating the expected spot rates.

Reference no: EM131027038

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