Question
Today, the spot price of the EUR/USD exchange rate is $1.0796. The bid and ask quotes for the six-month EUR/USD forward contracts are, respectively, 53.56
Today, the spot price of the EUR/USD exchange rate is $1.0796. The bid and ask quotes for the six-month EUR/USD forward contracts are, respectively, 53.56 and 55.68. Note that quotes are reported in basis points, which is the common practice in FX market. According to the interest rate parity, what is the implied foreign interest rate differential?
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
2nd edition
013299755X, 132162768, 9780132997553, 978-0132162760
