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Suppose You Observe a Spot Exchange Rate of $1

Question 37

Multiple Choice

Suppose you observe a spot exchange rate of $1.0500/€.If interest rates are 3 percent APR in the U.S.and 5 percent APR in the euro zone,what is the no-arbitrage 1-year forward rate?


A) €1.0704/$
B) $1.0704/€
C) €1.0300/$
D) $1.0300/€

Correct Answer:

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