Assume that annual interest rates in the United States are 4 percent, while interest rates in France
Question:
Assume that annual interest rates in the United States are 4 percent, while interest rates in France are 6 percent.
a. According to IRP, what should the forward rate premium or discount of the euro be?
b. If the euro’s spot rate is $1.10, what should the one-year forward rate of the euro be?
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