The One-Year Forward Exchange Rate Is Rupees 50

question 6

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)47.23
• B)48.61
• C)48.99
• D)49.32

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Definitions:

Limited Partnership

A limited partnership is a form of business ownership where there are one or more general partners, who manage the business and are personally liable for its debts, and one or more limited partners, who invest money but have limited liability and do not participate in management.

Double Taxation

The imposition of taxes on the same income, asset, or financial transaction at two levels, such as corporate profits taxed at both the corporate and individual shareholder levels.

Public Corporations

Corporations owned by the government and operated for the public benefit, often subject to different regulations than private corporations.

Unlimited Liability

A legal structure where business owners are personally responsible for all of the company's debts, putting personal assets at risk.