It is known that the interest rate of 1 year Australian dollar deposit is 6%, the interest rate of 1 year euro deposit is 3.5%, and the forward exchange rate of 1 year euro against Australian dollar is 1.6468. What is needed is the spot exchange rate of the euro against the Australian dollar.

The problem is to calculate the spot exchange rate from the forward exchange rate. Assuming that the spot exchange rate is X, it is solved according to the principle of interest rate parity, that is, the euro and Australian dollar are equivalent at the beginning, the euro principal and interest after 1 year are equivalent to the Australian dollar principal and interest, and the Australian dollar principal and interest divided by the euro principal and interest after 1 year is the forward exchange rate of 1 year.

At first 10000 euros can be exchanged for 10000x Australian dollars.

After 1 year, the principal and interest of 10000 euros is 10350 euros, and the principal and interest of 10000x Australian dollars is 10600x Australian dollars. The forward exchange rate =10600x/10350 =1.6468, and x= 1.6080 can be obtained.