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Suppose You Observe a Spot Exchange Rate of $2

Question 80

Multiple Choice

Suppose you observe a spot exchange rate of $2.00/£.If interest rates are 5 percent APR in the U.S.and 2 percent APR in the U.K.,what is the no-arbitrage 1-year forward rate?


A) £2.0588/$
B) $2.0588/£
C) £1.9429/$
D) $1.9429/£

Correct Answer:

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