Assume that interest rate parity exists. The 1-year nominal interest rate in the United States is 7

Question:

Assume that interest rate parity exists. The 1-year nominal interest rate in the United States is 7 percent, while the 1-year nominal interest rate in Australia is 11 percent.

The spot rate of the Australian dollar is $.60. Today, you purchase a 1-year forward contract on 10 million Australian dollars. How many U.S. dollars will you need in 1 year to fulfill your forward contract?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: