Question: Change in Forward Premium over Time Assume that the one-year interest rate in the United Kingdom is 9 percent, while the one-year interest in the

Change in Forward Premium over Time Assume that the one-year interest rate in the United Kingdom is 9 percent, while the one-year interest in the United States is 4 percent. The spot rate of the pound is

$1.50. Assume that interest rate parity exists. The quoted one-year interest in the United Kingdom is expected to rise consistently over the next month.

Meanwhile, the quoted one-year interest rate in the United States is expected to decline consistently over the next month. Assume that the spot rate does not change over the month. Based on this information,

how will the quoted one-year forward rate change over the next month?

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