Question: Please do not publish this question and I might get into troubles.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Please do not publish this question and I might get into troubles.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 =?

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