If Annual Interest Rates Are 10% in the U

question 10

Multiple Choice

If annual interest rates are 10% in the U.S. and 4% in Switzerland with quarterly compounding and the 90-day forward rate for the Swiss franc is $0.3864/SFr, at what current spot rate will interest rate parity hold?

• A) $0.3910/SFr
• B) $0.3897/SFr
• C) $0.3807/SFr
• D) $0.3762/SFr
• E) $0.3648/SFr

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Definitions:

Accounting Break-Even

The point at which total revenues equal total expenses, resulting in no net loss or gain for a business.

PI

An irrational number approximately equal to 3.14159, representing the ratio of a circle's circumference to its diameter. If intended as "Profitability Index," then it is a financial metric used to assess the attractiveness of an investment's potential return compared to its cost.

Financial Basis

Refers to the underlying support or foundation for an economic claim or accounting method, often related to how financial statements are prepared.

Cash Basis

An accounting method in which revenues and expenses are recorded only when cash is received or paid out.