Question: S0 = $1.0865/ S0 = 0.8223/$ S0 = $1.2316/ E (S1 (3-months)) = $1.1140/ F3-months = $1.0480/ Where: = euro; = British pound; E (

S0 = $1.0865/ S0 = 0.8223/$ S0 = $1.2316/ E (S1 (3-months)) = $1.1140/ F3-months = $1.0480/ Where: = euro; = British pound; E ( ) = Expected.

7. Do you think there is anything off or not right with the three-month forward rate given above for the euro? If yes, what is off or wrong with it?

8. Is the dollar expected to appreciate or depreciate in the coming three-month period against the euro? Explain your answer in your own words without using any calculations. Now, calculate the expected rate of appreciation or depreciation in the value of the dollar over the coming three-month period. Give your answer in percent with four decimal places

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