The One-Year Forward Exchange Rate Is Rupees 45

question 3

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)43.23
• B)43.75
• C)43.99
• D)44.32

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Definitions:

Break-Even

The point at which total revenues equal total costs, meaning there is neither profit nor loss.

Sales Dollars

The total monetary value of all sales transactions made by a company within a given period.

Town Division

A specialized segment within a larger organization or a local government area, focused on managing and providing services to a specific geographic area.

Country Division

A segment or unit of a company that operates in a specific country, responsible for tailoring operations to the local market.