Interest rate parity
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Assume that interest rate parity holds and that 90-day risk-free securities yield 5 percent in the United States and 5.3 percent in Germany. In the spot market, 1 euro equals $0.08 dollar.
A) Is the 90-day forward rate trading at a premium or discount relative to the spot rate?
B) What is the 90-day forward rate?
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Solution Summary
The expert calculates forward rate using Interest rate parity condition.
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Assume that interest rate parity holds and that 90-day risk-free securities yield 5 percent in the United States and 5.3 percent in Germany. In the spot market, 1 euro equals ...
Purchase this Solution
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