Question
9. (3 points) Suppose you observe the following dollar-euro spot exchange rate, and the U.S. and euro-zone annual interest rates. From the U.S. perspective, what
9. (3 points) Suppose you observe the following dollar-euro spot exchange rate, and the U.S. and euro-zone annual interest rates. From the U.S. perspective, what must be the no-arbitrage one-year forward rate of dollars per euro according to Interest Rate Parity (IRP)?
| Spot exchange rate | S($/)
| = | $1.05/
|
| 360-day forward rate | F360($/)
| = | ? |
| Annual U.S. interest rate | i$
| = | 5.0%
|
| Annual euro-zone interest rate | i
| = | 3.0%
|
- $0.9709/.
- $1.03/.
- $1.0704/.
- $1.1025/.
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Information Quality Assurance And Internal Control For Management Decision Making
Authors: William R Kinney
1st Edition
0256221618, 9780256221619
