Suppose That the 1-Year Forward Rate of Dollar Per Peso

question 9

Multiple Choice

Suppose that the 1-year forward rate of dollar per peso is $11.25,the current spot rate $/peso is $10.00,and the expected future spot rate $/peso is $11.50.The risk premium on the peso is:

• A) -2.5%
• B) 12.5%
• C) 15%
• D) 22.75%

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