The One-Year Forward Exchange Rate Is Rupees 45

question 88

Multiple Choice

The one-year forward exchange rate is Rupees 45/$. 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 43.23/$
• B) Rupees 43.75/$
• C) Rupees 43.99/$
• D) Rupees 44.32/$