Question
Intro The current exchange rate between the dollar and euro is $1.33 per euro. The nominal annual risk-free rate is 1% in the U.S. and
Intro
The current exchange rate between the dollar and euro is $1.33 per euro. The nominal annual risk-free rate is 1% in the U.S. and 0.8% in Europe.
Part 1
What should be the one-year forward premium according to interest rate parity?
Part 2
What should be the one-year forward rate according to interest rate parity (in dollars per euro)?
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Derivatives And Internal Models
Authors: H. Deutsch
4th Edition
1349307661, 9781349307661
