Question: Suppose that the current exchange rate between the dollar and the euro is $ 1 . 1 3 per euro. Interest rates are 3 .

Suppose that the current exchange rate between the dollar and the euro is $

1.13

per euro. Interest rates are

3.9 %

in dollars and

5.7 %

in euros, for all maturities. The interest rates are quoted with continuous compounding. Suppose you take a short position in the forward contract to deliver euros in exchange for dollars in

10

months. What is the value of the contract today?

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