This is a self study question. I'm calculating a forward rate.
Specifically, I have that in a country X, the Spot Rate is 5X/1US. I also have that the 1 year interest rate is 13% in country X and inflation is 12%. The US interest rate is 4% with 3% inflation.
I'm computing the forward rate as:
$F= S(1+i_d)/(1+i_f) = 5 *(1+.04)/(1+.13) = 4.602.$
However I'm also told that X's market risk premium is 300 basis points above US treasuries. I'm unsure how to factor that in....