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3. Dollar Corp. has a subsidiary in Thailand that expects to send to the US parent company 100,000 USD one year from now. The CFO

3. Dollar Corp. has a subsidiary in Thailand that expects to send to the US parent company 100,000 USD one year from now. The CFO of Dollar Corp. will use this 100,000 USD to pay bonus to its employees. Not knowing what the the interest rates will be one year from now, the CFO, wants to lock in a rate one year from now for a period of one year. If the current spot rates are:

  • 1-year rate: 5%
  • 2-year rate: 7%

What is the forward rate the CFO. can get?

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