Look at Table 22.1. If the 3-month forward exchange rate is USD1.55 = GBP1 and the 3-month
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Look at Table 22.1. If the 3-month forward exchange rate is USD1.55 = GBP1 and the 3-month interest rate on dollars is 3.5% (effective annual rate), what do you think is the 3-month sterling (U.K.) interest rate? Explain what would happen if the rate were substantially above your figure.(Hint: In your calculations remember to convert the annually compounded interest rate into a rate for 3 months.)
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* Direct quotes (number of U.S. dollars per unit of foreign currency). Other quotes are indirect (units of foreign currency per U.S. dollar).
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Given Data Table 221 Country Currency Exchange Rate Europe Euro zone countries Eur...View the full answer
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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