Interest Rate Parity If the Spot Rate Between the U

question 10

Multiple Choice

Interest Rate Parity If the spot rate between the U.S.dollar and the New Zealand dollar is $1 = NZD1.5215,and if the interest rate in the United States is 8 percent and in New Zealand is 4 percent,then what should be the three-month forward exchange rate?

• A)$0.6637
• B)$0.6572
• C)$0.6825
• D)$0.6329

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Definitions:

LMC

Least Material Condition, a feature of size symbol that denotes the tolerance condition of a part when it contains the least amount of material within specified limits.

Feature of Size

Refers to any geometric characteristic of a part that includes a dimensional specification, such as diameter, length, or width.

Diameter

A straight line passing through the center of a circle or sphere and terminating at both circumferences, representing the widest distance across it.

Thickness

The dimension from one surface of an object to the opposite surface, measured perpendicular to the surfaces.