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:

Uplifts

Positive experiences or events that can improve a person’s mood and counteract the effects of stress.

Self-Actualization

Attaining one's utmost talents and potential, recognized as a deep-seated drive or compulsion in everybody.

Esteem

A sense of self-worth or value that one attributes to oneself.

Physiological

Relating to the functions and processes of living organisms and their parts, including physical and chemical processes.