Question: The spot exchange rate for converting one US dollar into an FD ( a foreign dollar ) is 8 . 0 0 . The spot

The spot exchange rate for converting one US dollar into an FD (a foreign dollar) is 8.00. The
spot rate for converting one FD into USD is 0.125(=1/8.00). Annual continuously compounded
US interest rate is 1.0%. Annual continuously compounded foreign interest rate is 4.0%. A long
fair FD forward contract obligates the holder to buy one FD in 9 months time (paying USD).
What is the fair forward price of this contract?

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