Dollar denominated deposit pays 5% interest rate, while pound denominated deposit pays 7% interest rate. Forward rate
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Question:
Dollar denominated deposit pays 5% interest rate, while pound denominated deposit pays 7% interest rate. Forward rate for dollars per pound is 2, while current exchange rate (spot rate) is 1.8.
a) Does the CIP hold?
b) At what forward rate does it hold?
c) At what spot rate does it hold?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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