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Suppose that the spot exchange rate today between the U.S. dollar and the currency of country W is U.S. $1.9905 per unit of currency of
Suppose that the spot exchange rate today between the U.S. dollar and the currency of country W is U.S. $1.9905 per unit of currency of country W and the U.S. dollar and the currency of country V is U.S. $0.00779 per unit of country V. The following for- ward rates are also quoted today: Country W Currency Country V Currency 0.007774 30 days 1.9908 60 1.9597 0.007754 90 1.9337 0.007736 10 a. Explain what someone who enters into a 30-day forward contract to deliver the currency of country W is agreeing to do. b. Explain what someone who enters into a 90-day forward contract to buy the cur- rency of country V is agreeing to do. Chapter 32 The Market to 32 The Market for Foreign Exchange and Risk Control Instruments C. What can you infer about the relationship between U.S. and country W's short- term interest rates and U.S. and country V's short-term interest rates
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