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Currently the USD/EUR spot exchange rate is: X 0 USD/EUR = 1.24; we also have the following one-year interest rates: r USD = 5% and

Currently the USD/EUR spot exchange rate is: X0USD/EUR = 1.24; we also have the following one-year interest rates: rUSD = 5% and rEUR = 2%. If you assume that the UIRP condition holds at time = 0 and time = 1 then the expected USD/EUR: E (X1USD/EUR) =

1.3129

1.2423

1.2310

1.2765

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