Question
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese yen 109.97 - 110.01 110.01 - 110.05 109.98 -
The following are quotes for several U.S. currency dealers.
Dealer | A | B | C | D | E |
Japanese yen | 109.97 - 110.01 | 110.01 - 110.05 | 109.98 - 110.00 | 109.99 - 110.02 | 110.02 - 110.06 |
Euro | 1.1774 - 1.1776 | 1.1778 - 1.1781 | 1.1776 - 1.1778 | 1.1773 - 1.1775 | 1.1776 - 1.1778 |
Covered interest arbitrage (Inter-temporal) - assume that the highest bid and lowest ask are equal (i.e., that the bid-ask spread is zero)
9. Assume the interest rate of 1-year risk free debt denominated in US dollars is 2.75% and the interest rate on 1-year risk free debt denominated in Russian rubles is 7.25%. If the spot market exchange rate for the Russian ruble (USD/RUB) is 61.24, what is the 1-year forward exchange rate if interest rate parity holds?
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