I am having some trouble wrapping my head around this. I am looking at blue box 8 in risk. question #1. I do not understand why the spot rate is discounted at the international rate and the forward rate is discounted at the us rate. it seems to me they should both be discounted at the same rate. Does anyone have some insight on this to make it easier to understand?
euro rate US rate
8.62/(1.05)^1.5 - .90/(1.06)^1.5