Question: S0 = $1.2314/ S0 = 0.9278/$ S0 = $1.0778/ E (S1 (3-months)) = $1.1980/ F3-months = $1.2680/ Where: = euro; = British pound; E (

S0 = $1.2314/ S0 = 0.9278/$ S0 = $1.0778/

E (S1 (3-months)) = $1.1980/

F3-months = $1.2680/

Where: = euro; = British pound; E ( ) = Expected.

Is the dollar expected to appreciate or depreciate in the coming three-month period against the pound? . 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.

spot rate for the pound at the end of the three-month period is $1.2680/ + $0.0366/ = $1.3046/

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