The One-Year Forward Exchange Rate Is Rupees 50

question 30

Multiple Choice

The one-year forward exchange rate is Rupees 50/$. If the one-year interest rate in the United States is 5% and in India is 8%, what is the spot exchange rate so as to preclude arbitrage?

• A) Rupees 47.23/$
• B) Rupees 48.61/$
• C) Rupees 48.99/$
• D) Rupees 49.32/$

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Definitions:

Work Responsibilities

The duties and tasks that an employee is expected to perform as part of their job role within an organization.

Decentralized Fashion

An organizational approach where decision-making powers are distributed throughout various levels rather than concentrated at a central point.

Decision Making

The process of selecting a course of action from multiple alternatives, often critical for resolving problems or achieving goals.

Informal Structures

Informal structures refer to the unofficial relationships and channels of communication that form naturally among employees within an organization, shaping social networks and influencing how work actually gets done.