Suppose You Observe a Spot Exchange Rate of $1

question 85

Multiple Choice

Suppose you observe a spot exchange rate of $1.50/€. If interest rates are 5% APR in the U.S. and 3% 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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