Question
The following current rates have been observed: Spot exchange rate: $1.25/SFr Expected future spot rate in 90 days: $1.2625/SFr Annual interest rate on 90-day U.S.-dollar-denominated
The following current rates have been observed:
Spot exchange rate: $1.25/SFr
Expected future spot rate in 90 days: $1.2625/SFr
Annual interest rate on 90-day U.S.-dollar-denominated bonds: 10%
Annual interest rate on 90-day SFr-denominated bonds: 6%
(1) At these initial rates, does uncovered interest parity hold (if EUD has an absolute value less than 0.005, then we assume EUD=0.)? Why?
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The American Economy
Authors: Walter Greason, William Gorman
1st Edition
1524902675, 9781524902674
