The One-Year Forward Exchange Rate Is Rupees 40

question 87

Multiple Choice

The one-year forward exchange rate is Rupees 40/$.If the one-year interest rate in the United States is 4% and in India is 7%,what is the spot exchange rate so as to preclude arbitrage?

• A)38.88
• B)39.01
• C)39.23
• D)39.32

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