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. Suppose US and UK interest and exchange rates were as follows: Exchange rates ($/Pound) Spot: 1.30 1-Yr Forward: ??? Annual interest rates US 5%
. Suppose US and UK interest and exchange rates were as follows: Exchange rates ($/Pound)
Spot: 1.30
1-Yr Forward: ???
Annual interest rates US 5% UK 4%
What $/Pound 1-YR forward rate would be required for covered interest rate parity to hold in this case? (Hint: Use the covered interest arbitrage equation.)
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