Question
Suppose that General Electric exported a 120' wind turbine to Scotland and billed 5,000,000 that is payable in one year. The money market interest rates
Suppose that General Electric exported a 120' wind turbine to Scotland and billed £5,000,000 that is payable in one year. The money market interest rates and foreign exchange rates are below:
U.S. 1-yr rate: 3.3%
U.K. 1-yr rate: 5.5%
Spot rate: $1.50/ £
One-year forward rate: ?
What should the one-year forward rate be for the Pound if Interest Rate Parity holds?
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Bank Management and Financial Services
Authors: Peter Rose, Sylvia Hudgins
9th edition
78034671, 978-0078034671
