Question: Please do not publish this question and I might get into troubles. Please advise step by step how can be resolved. Thank you! The rate
Please do not publish this question and I might get into troubles. Please advise step by step how can be resolved. Thank you!
The rate of return on 90-day U.S. treasury securities is 3.9% and the rate of return on 90-day U.K. risk-free securities is 5.0%. Using the spot exchange information from Table 17-1, estimate the 90-day forward exchange rate.
| Using knowledge of interest rate parity, the following problem is set up. | |||
| Spot exchange rate (direct quotation) = | 1.3071 | ||
| Home nominal interest rate = | 3.9% | ||
| Foreign nominal interest rate = | 5.0% | ||
| Time to maturity on securities (in years) = | 0.25 |
| ft / (spot exchange rate) | = | [ (1+rh) / (1+rf) ] |
Home periodic interest rate = ?
Foreign periodic interest rate =?
estimate the 90-day forward exchange rate =?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
