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It is now on September 25. You observe the EURUSD spot exchange rate is 1.0670 and the 1-year forward exchange rate is 1.0850. What is
It is now on September 25. You observe the EURUSD spot exchange rate is 1.0670 and the 1-year forward exchange rate is 1.0850.
- What is the annualized forward premium? (4 points)
- Based on the no-arbitrage condition, what is the approximate one-yearinterest rate differential between the U.S. and the euro area? (3 points)
- Which currency has a higherone-year interest rate? Why? (3 points)
- If you observe that the one-year spot interest rate for the EUR is 3%, what is the one- year spot USD interest rate? (2 points)
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Innovation And Technology
Authors: Nikos Vernardakis
1st Edition
0415676800, 978-0415676809
