Suppose You Observe a Spot Exchange Rate of $1

question 2

Multiple Choice

Suppose you observe a spot exchange rate of $1.50/€. If interest rates are 3% APR in the U.S. and 5% APR in the euro zone, what is the no-arbitrage 1-year forward rate?

• A)€1.5291/$
• B)$1.5291/€
• C)€1.4714/$
• D)$1.4714/€

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Definitions:

Critics

Individuals or groups who express judgments and opinions on works of art, policies, performances among others, often based on careful analysis and evaluation.

Utilitarian Theory

A normative ethical theory that suggests the best action is the one that maximizes utility, typically defined as that which produces the greatest well-being of the greatest number of people.

Public Policy

The principles and actions adopted or proposed by a government or organization to address public issues, concerns, or the welfare of the community.

Justified Punishment

A penalty deemed appropriate and rightful, given in response to a violation of laws or ethical standards.