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Exchange Rate, Banking Procedures and Services, Policy and Interest Rate (Total 25%) Use Formula: F = S (1+) (1+) F = forward rate S =

Exchange Rate, Banking Procedures and Services, Policy and Interest Rate (Total 25%)

Use Formula: F = S (1+) (1+)

F = forward rate

S = spot rate

i = interest rate

Question 1 (1.25%)

The Fijian Dollar is currently trading for AUD 2.55. if the interest rate in Australia is 5.5% and the interest rate in the New Zealand is 6.5%, what would be the one-year forward exchange rate?

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