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-350 pips or a discount of 2.55% relative to Sanjib Ghosh works in the International Investment department of Temasek Holdings of Singapore. Temasek plans to
-350 pips or a discount of 2.55% relative to
Sanjib Ghosh works in the International Investment department of Temasek Holdings of Singapore. Temasek plans to invest in the US in 6 months because the interest rate in the US is expected to be 3% higher per annum than the rate in Singapore. To avoid exchange rate risk, Sanjib is interested in entering a forward contract today to buy 30 million USD in 6 month. He asks DBS for a six-month forward exchange rate of SGD/USD and obtains two quotes from DBS: -350 pips or a discount of 2.55% relative to the spot rate. Sanjib has no clue about the SGD/USD spot rate and thus is very confused. Can you help him to figure out the forward rate that he is looking for? Round your answer to four decimal placesStep by Step Solution
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