Question

erest rate parity holds. The U.S. interest rate is 13 percent and the British interest rate is 10 percent. The forward rate on British pounds exhibits a ____ of ____ percent.​

Answer 1

discount; 2.73

premium; 2.73

discount; 3.65

premium; 3.65

The forward rate on British pounds exhibits a premium of 2.73 percent.​Answer: Option 2.

Explanation:

An interest rate is the percentage of principal charged by the bank for the utilization of its cash. The chief is the measure of cash advanced. Since banks acquire cash from you (as stores), they additionally pay you a loan fee on your cash.

The nominal interest rate is the rate of interest with no alteration for inflation. For instance, assume somebody stores $100 with a bank for 1 year, and they get enthusiasm of $10 (before charge), so toward the year's end, their parity is $110 (before charge).