Assume that interest rate parity holds and that 90-day risk-free securities yield 5% in the United States

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Assume that interest rate parity holds and that 90-day risk-free securities yield 5% in the United States and 5.3% in Britain. In the spot market, 1 pound = $2.

a. Is the 90-day forward rate trading at a premium or a discount relative to the spot rate?

b. What is the 90-day forward rate?

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Fundamentals of Financial Management

ISBN: 978-0324664553

Concise 6th Edition

Authors: Eugene F. Brigham, Joel F. Houston

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Question Posted: Oct 05, 2011 09:57 AM

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Assume that interest rate parity holds and that 90-day risk-free securities yield 5% in the United States

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a r NOM of 90day US riskfree securities 5 r NOM of 90day British ...View the full answer

Fundamentals of Financial Management

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