Multiple Choice
Small Corporation would like to forecast the value of the Cyprus pound (CYP) five years from now using forward rates. Unfortunately, Small is unable to obtain quotes for five-year forward contracts. However, Small observes that the five-year interest rate in the U.S. is 11%, while the Cyprus five-year interest rate is 15%. Based on this information, the Cyprus pound should ____ by ____% over the next five years.
A) appreciate; 16.22
B) depreciate; 16.22
C) appreciate; 6.66
D) depreciate; 6.66
E) none of the above
Correct Answer:
Verified
Correct Answer:
Verified
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