Question: James Clark is a foreign exchange trader with Citibank. He notices the following quotes. __________________________________________________________________________________________________ Spot exchange rateUSD1.2051/SFr Six-month forward exchange rateUSD1.1922/SFr Six-month $ interest

James Clark is a foreign exchange trader with Citibank. He notices the following quotes.

__________________________________________________________________________________________________

Spot exchange rateUSD1.2051/SFr

Six-month forward exchange rateUSD1.1922/SFr

Six-month $ interest rate8% per year

Six-month SFr interest rate10% per year

___________________________________________________________________________________________________

Is the interest rate parity holding? You may ignore transaction costs.

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