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Suppose You Observe a Spot Exchange Rate of $1

Question 85

Multiple Choice

Suppose you observe a spot exchange rate of $1.50/€. If interest rates are 5% APR in the U.S. and 3% APR in the euro zone, what is the no-arbitrage 1-year forward rate?


A) €1.5291/$
B) $1.5291/€
C) €1.4714/$
D) $1.4714/€

Correct Answer:

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