Suppose That the One-Year Forward Price of Euros in Terms

question 75

Multiple Choice

Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro.Further,assume that the spot exchange rate is $1.05 per euro,and the interest rate on dollar deposits is 10 percent and on euro it is 4 percent.Under these assumptions

• A)interest parity does not hold.
• B)interest parity does hold.
• C)it is hard to tell whether interest parity does or does not hold.
• D)Not enough information is given to answer the question.
• E)interest parity fluctuates.

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Definitions:

Second Only

Indicates that something is immediately after the first in position, importance, or rank, often used to denote a high level of status or quality next to the top-ranking position.

Obsessions

Persistent, intrusive, and unwanted thoughts or urges that cause distress or anxiety.

Repetitive Behaviours

Actions or rituals that are performed the same way repeatedly, often observed in various psychological conditions.

Intrusive Thoughts

Unwanted and often distressing thoughts, images, or ideas that suddenly appear in a person's mind.