# Assume that the British pounds 1-year forward rate exhibits a discount. Assume that interest rate parity continually

## Question:

Assume that the British pound’s 1-year forward rate exhibits a discount. Assume that interest rate parity continually exists. Explain how the discount on the British pound’s 1-year forward discount would change if British 1-year interest rates rose by 3 percentage points while U.S. 1-year interest rates rose by 2 percentage points.

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