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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Definitions:

Trapezius Muscle

A large muscle on the back of the neck and upper back that supports the arm and shoulder movements.

Lethargy

A state of tiredness, weariness, fatigue, or lack of energy, which can be a symptom of various medical conditions.

Hypotension

A condition characterized by abnormally low blood pressure, which can lead to symptoms such as dizziness and fainting.

Fungal Infection

An illness resulting from the invasion of fungi in the body, which can affect the skin, nails, or internal organs.