Explore BrainMass
Share

Explore BrainMass

    Calculating the interest rates by using IRP concept

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Assume that Interest Rate Parity holds. The spot rate for the Euro is $1.20 and the one year forward rate is $1.23. The annual rate of interest in Germany on annual deposits is 2.439%. What is the annual rate of interest on deposits in the United States?

    © BrainMass Inc. brainmass.com October 10, 2019, 6:33 am ad1c9bdddf
    https://brainmass.com/business/interest-rates/calculating-the-interest-rates-by-using-irp-concept-548437

    Solution Preview

    Spot Rate of Euro=$1.20
    Forward Rate of Euro=$1.23
    Interest Rate in Foreign country=2.439%
    Interest Rate in Home ...

    Solution Summary

    Solution depicts the steps to calculate the interest rate by using concept of "Interest Rate Parity".

    $2.19