Suppose the spot exchange rate for the Korean won (KRW) is KRW120/USD (USD is the U.S. dollar). If the risk-free rate of interest in the United States is 10% and the risk-free rate of interest in Korea is 5%, then what must be the one-year forward rate be to prevent covered interest arbitrage?

Answer rating: 100% (QA)

To prevent covered interest arbitrage the oneyear forward exchange rate should be such that there ... View the full answer