Question
The exchange rate of one Swiss franc is $1.37. The price of a 6-month U.S. zero coupon bond is $0.92, and the price of a 1-year U.S. zero coupon bond is $0.89. Forward contracts are available on the Swiss franc. The forward price is $1.35 for a 6-month forward and $1.39 for a 1-year forward.
What should be the fixed rate for a 1-year semiannual interest rate swap in Switzerland? Write your answer in unit of percentage points.
What should be the fixed rate for a 1-year semiannual interest rate swap in Switzerland? Write your answer in unit of percentage points.