Suppose You Observe a Spot Exchange Rate of $2

question 59

Multiple Choice

Suppose you observe a spot exchange rate of $2.00/£. If interest rates are 5% APR in the U.S. and 2% APR in the U.K., what is the no-arbitrage 1-year forward rate?

• A)£2.0588/$
• B)$2.0588/£
• C)£1.9429/$
• D)$1.9429/£

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Definitions:

Place of Delivery

The specific location agreed upon by the parties in a contract where goods are to be delivered or services are to be provided.

Seller's Place

The location stipulated in a contract where the seller is expected to deliver goods or perform services.

UCC

The Uniform Commercial Code constitutes a thorough legislative framework that governs all kinds of business interactions throughout the United States.

Inspection

The process of examining something carefully, typically to ensure compliance with standards, regulations, or conditions.