Assume that interest rate parity (IRP) exists. Assume this information is
provided by today's Wall Street Journal.
Spot rate of Swiss franc = $.80
6-month forward rate of Swiss franc = $.78
12-month forward rate of Swiss franc = $.81
Assume that the annualized U.S. interest rate is 7% for a six-month maturity and a 12-month maturity. Do you think the Swiss interest rate for a 6-month maturity is greater than, equal to, or less than the U.S. interest rate for a 6-month maturity? Explain.© BrainMass Inc. brainmass.com June 4, 2020, 12:48 am ad1c9bdddf
According to interest rate parity, the difference in interest rates must equal the difference between the future and current exchange rates.
F0 = ...
This post discusses interest rate on different time of maturity.