Suppose that General Electric exported a 120' wind turbine to Scotland and billed £5,000,000 that is payable in one year. The money market interest rates and foreign exchange rates are below:

U.S. 1-yr rate: 3.3%

U.K. 1-yr rate: 5.5%

Spot rate: $1.50/ £

 

One-year forward rate: ?

 

What should the one-year forward rate be for the Pound if Interest Rate Parity holds?

Answer rating: 100% (QA)

Okay lets solve this using Interest Rate Parity GE wil... View the full answer