1. Suppose that 1-year, 2-year, and 3-year forward prices for the EURO are $1.28, $1.27, and $1.12, respectively. The 1-year, 2-year, and 3-year effective annual interest rates in the U.S. are 6.3%, 5.8%, and 5.1%. What is the fixed exchange rate in a 3-year EURO swap? (In other words, what 3-year U.S. dollar annuity is equivalent to a 3-year annuity of EURO 1?)

A.1.42

B.1.52

C. 1.67

D. 1.54

E.1.38