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Suppose You Observe a Spot Exchange Rate of $2

Question 59

Multiple Choice

Suppose you observe a spot exchange rate of $2.00/£. If interest rates are 5% APR in the U.S. and 2% 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/£

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