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

question 34

Multiple Choice

Suppose the spot rates for the pound, mark, and Swiss franc are $1.30, $.35, and $.40, respectively. The associated 90?day interest rates (annualized) are 16%, 8%, and 4%, while the U.S. 90?day interest rate (annualized) is 12%. What is the 90?day forward rate on an ACU (ACU 1 = £1 + DM1 + SFr1) if interest parity holds?

• A) $2.0512
• B) $2.1134
• C) $2.0397
• D) $2.0489

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