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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