The Spot $/€ Is Equal to 1

question 16

Essay

The spot $/€ is equal to 1.1795. The one-year interest rates on the Eurocurrency market are 4% in euros and 5% in U.S. dollars. The one-month interest rates are 3% in euros and 4% in U.S. dollars.
a. What is the one-year forward exchange rate?
b. What is the one-month forward exchange rate?

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