Question
Spot exchange rate is $1.48 = 1 Euro. One-year futures contract on one million Euro is currently trading at $1.45 per Euro. According to the
Spot exchange rate is $1.48 = 1 Euro. One-year futures contract on one million Euro is currently trading at $1.45 per Euro. According to the interest rate parity equation, and assuming the futures market is in equilibrium, which of the following is true regarding the interest rates?
| a. | Interest rate is higher in the U.S. | |
| b. | Interest rate in the U.S. is expected to decline | |
| c. | Interest rate is higher in the Euro zone | |
| d. | Interest rates are equal the U.S. and the Euro zone |
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Investment Science
Authors: David G. Luenberger
1st International Edition
0195391063, 9780195391060
