The One-Year Forward Exchange Rate Is Rupees 40

question 59

Multiple Choice

The one-year forward exchange rate is Rupees 40/$. If the one-year interest rate in the United States is 4% and in India is 7%, what is the spot exchange rate so as to preclude arbitrage?

• A) Rupees 38.88/$
• B) Rupees 39.01/$
• C) Rupees 39.23/$
• D) Rupees 39.32/$

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Definitions:

Stratum Corneum

The outermost layer of the epidermis, consisting of dead and flattened keratinocytes that act as a barrier to infection and water loss.

Stratum Spinosum

A layer of the epidermis found above the basal layer, characterized by its spiny appearance due to desmosomal connections between cells.

Stratum Basale

The deepest layer of the five layers of the epidermis, responsible for the generation of new skin cells.

Mitosis

A type of cell division that results in two daughter cells each having the same number and kind of chromosomes as the parent nucleus, typical of ordinary tissue growth.