Today, the spot price of the EUR/USD exchange rate is $1.0796. The bid and ask quotes for the nine-month EUR/USD forward contracts are, respectively, 73.56 and 75.68. According to the interest rate parity, what is the implied foreign interest rate differential? Recall that quotes are reported in basis points, which is the common practice in FX market. (a) 0.51% (b) 1.37% (c) 2.73% (d) 0.92%

Answer rating: 100% (QA)

To calculate the implied foreign interest rate differential using the interest rate parity formula w... View the full answer