Question
3. Interest rate parity: The annual, riskless, nominal interest rate in the Eurozone is [ 0.5%]. The spot rate between the euro (EUR) and the
3. Interest rate parity: The annual, riskless, nominal interest rate in the Eurozone is [ 0.5%]. The spot rate between the euro (EUR) and the dollar (USD) is USD 1.1074 / EUR and the 90-day forward rate between the euro and the dollar is USD 1.0930 / EUR. a) What is the annual, riskless, nominal interest rate in the US if interest rate parity holds? b) What happens if interest rate parity is violated? Explain. (7 points) a) Calculate annual, riskless, nominal interest rate in US: b) Answer the question here
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Finance For Non Financial Managers
Authors: Pierre Bergeron
6th Edition
0176501630, 9780176501631
