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? Multip…

Question

asked Nov 11, 2020 144k views

1 Answer

Nasim · Answer 1 · 2020-11-17T14:48:28+0000

Answer:

Forward rate= Spot rate * (1+ US interest rate)/(1+Euro interest rate)

= 1.05*1.05/1.03

Forward rate= $1.0704/€

Step-by-step explanation: