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?
Spot Rate of Euro=$1.20
Forward Rate of Euro=$1.23
Interest Rate in Foreign country=2.439%
Interest Rate in Home ...
Solution depicts the steps to calculate the interest rate by using concept of "Interest Rate Parity".