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Suppose you observe a spot exchange rate of $1.0500/. If interest rates are 5% APR in the U.S. and 3% APR in the euro zone,
Suppose you observe a spot exchange rate of $1.0500/. If interest rates are 5% APR in the U.S. and 3% APR in the euro zone, what is the no-arbitrage 1-year forward rate?
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a 1.0704/$
b. $1.0704/
c. 1.0300/$
d. $1.0300/
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