Question
Interest Rate Parity One year rates are: US: 2% EUR: 1.5% GBP: 3% The EURUSD rate is 1.10. The GBPUSD rate is 1.18. 1. What
Interest Rate Parity
One year rates are:
US: 2%
EUR: 1.5%
GBP: 3%
The EURUSD rate is 1.10.
The GBPUSD rate is 1.18.
1. What should the 1 year EURUSD forward rate be?
2. What should the 1 year GBPUSD forward rate be?
3. What should the 1 year EURGBP forward rate be?
4. If the 1 year EURUSD forward rate is 1.15, describe the steps needed to earn a riskless profit.
5. If the 1 year GBPUSD forward rate is 1.15, describe the steps needed to earn a riskless profit.
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Investing All In One
Authors: Eric Tyson
1st Edition
1119376629, 978-1119376620
