Suppose the Spot Rates for the Pound, Mark, and Swiss $$32, and

question 16

Multiple Choice

Suppose the spot rates for the pound, mark, and Swiss franc prior to 1999 were $$.32, and $.40, respectively. At the same time, the associated 90-day interest rates (annualized) were 16%, 8%, and 4%, while the U.S. 90-day interest rate was 12%. What was the 90-day forward rate (to the nearest cent) on a TCU (TCU 1 = £1 + DM1 + SFr1) if interest parity were to hold?

• A) $1.92
• B) $1.98
• C) $1.94
• D) $1.87

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