Question
Assume that interest rate parity holds and that 90-day risk-free securities yield a nominal annual rate of 3% in the United States and a nominal
Assume that interest rate parity holds and that 90-day risk-free securities yield a nominal annual rate of 3% in the United States and a nominal annual rate of 35% in the United Kingdom. In the spot market, 1 pound $1.56.
a. What is the 90-day forward rate?
b. Is the 90-day forward rate trading at a premium or a discount relative to the spot rate?
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The Handbook Of Fixed Income Securities
Authors: Frank Fabozzi, Steven Mann, Francesco Fabozzi
9th Edition
1260473899, 978-1260473896
