Question
A $5000 bill with a $50 coupon in the US is currently selling at $4750, and a 10,000 British Pound bill with a 100 Pound
A $5000 bill with a $50 coupon in the US is currently selling at $4750, and a 10,000 British Pound bill with a 100 Pound coupon is trading for 9800 Pounds. Both mature in 1 year. The US Dollar is currently trading at .65 Pounds. If uncovered interest parity holds, the market believes the dollar will trade at ____ Pounds in 1 years’ time. (Round to the nearest 2 decimal points)
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Step: 1
We can use the uncovered interest parity formula to solve for the expected exchange rate 1 rUS 1 rUK ...
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
15th edition
77861612, 1259194078, 978-0077861612, 978-1259194078
