Suppose that 1-year, 2-year, and 3-year forward prices for the Australian dollar are $1.13/A$, $1.20/A$, and $1.31/A$, respectively. The 1-year, 2-year, and 3-year effective annual interest rates in the U.S. are 3.5%, 2.7%, and 2.1%. What is the fixed exchange rate in a 3-year Australian dollar swap? (In other words, what 3-year U.S. dollar annuity is equivalent to a 3-year annuity of A$1?)

a.

$0.91

b.

$1.48

c.

$1.39

d.

$1.21

e.

$1.15

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