Again, like the previous problem, on February 4 of a particular year, the spot rate for U.S.
Question:
Again, like the previous problem, on February 4 of a particular year, the spot rate for U.S. dollars ($) expressed in euros (€) was $0.7873/€. The U.S. interest rate (compounded annually) was 5.36 percent, whereas the euro interest rate (compounded annually) was 3.11 percent. Form a European perspective, what should be the forward rate of a contract that expires September 4? (Assume that each month is one-twelfth of a year.) How does your answer here differ from that of the previous problem?
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We are given S 0 07873 r 00536 r 00311 and T 812 The model for the foreign exchange futures price ...View the full answer
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