Question: Which answer is correct? If the one-year future rate is $1=0.84 and the two-year rate is $1=0.88 and the one and two year interest rates

Which answer is correct?

If the one-year future rate is $1=0.84 and the two-year rate is $1=0.88 and the one and two year interest rates are 2 per cent

and 3 percent respectively, the exchange rate on a two-year swap of dollar for sterling is:

a) 0.853

b) 0.860

c) 0.871

d) 0.880

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