According to the interest rate parity theory, a currency with a high interest rate has a forward discount. In this question, the euro interest rate is high, and the forward euro discount means that the exchange rate drops and the extent of the drop (premium rate or swap cost rate (converted into an annual rate) is equal to the interest rate difference. Assume the forward exchange rate is F and the spot exchange rate is S (1.2), then:
(S-F)*100%*12/(S*3)= 5%-3%
F=1.2-(5%-3%)*3/12*1.2=1.1940
The 3-month forward exchange rate of the euro against the US dollar is 1 Euro = 1.1940 US dollars
The euro has a discount of 60 points
The US dollar has a premium of 60 points