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Suppose that you want to use the forward rate to obtain a three-year forecast of the U.S. dollar- Norwegian Krone spot exchange rate. The three-year
Suppose that you want to use the forward rate to obtain a three-year forecast of the U.S. dollar- Norwegian Krone spot exchange rate. The three-year interest rate in the United States is 2 percent compounded annually and the three-year interest rate in Norway is 6 percent compounded annually. The spot exchange rate is NOK9.0000/$. Given that interest rate parity holds, your forec of the U.S. dollar-Norwegian Krone spot exchange rate three years from now should be NOK /$. Round your answer to four decimal places
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