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:

Departments

Divisions within an organization, each responsible for specific functions or tasks, contributing to the organization's overall objectives.

Customizing Department

A specialized unit within a company that modifies products to meet specific customer requirements or preferences.

Departmental Predetermined Overhead Rates

Overhead rates calculated for each department based on estimated costs and activity levels, used to allocate overhead costs to products.

Machine-Hours

Machine-Hours are a measure of the actual running time that a machine or group of machines operates during a given period.