Question
You are studying interest parity conditions and are looking at examples that occurred last year (2021). You see the following: Spot rate on January
You are studying interest parity conditions and are looking at examples that occurred last year (2021). You see the following: Spot rate on January 1, 2021: Interest rate in U.S. on January 1, 2021: Interest Rate in Brazil on January 1, 2021: Actual spot rate on October 1, 2021: 4.025 BRL/USD (BRL = Brazilian real) 4% 8% 5.757 BRL/USD Assuming the market was in equilibrium and that interest rate parity conditions held, what was the forward rate for BRL/USD on January 1st, 2021 for delivery on October 1st, 2021 (nine-month rate)?
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