Multiple Choice
Suppose that the one-year interest rate is 5.0 percent in the United States; the spot exchange rate is $1.20/€; and the one-year forward exchange rate is $1.16/€. What must one-year interest rate be in the euro zone to avoid arbitrage?
A) 5.0%
B) 6.09%
C) 8.62%
D) None of the above
Correct Answer:
Verified
Correct Answer:
Verified
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