Assume that interest rate parity holds and that 90-day risk-free securities yield 5 percent in the United
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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 $0.80 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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Related Book For
Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
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