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Butoxors [25]
3 years ago
5

Assume that interest rate parity holds and that 90-day risk-free securities yield 6% in the United States and 6.5% in Germany. I

n the spot market, 1 euro equals $1.35. What is the 90-day forward rate
Business
1 answer:
Marianna [84]3 years ago
3 0

Answer: 1.356345

Explanation:

Based on the scenario and information provided in the question, the 90-day forward rate will be calculated as:

= Spot Rate × (1 + Germany Interest Rate) / (1 + United States Interest Rate)

= 1.35 × (1 + 6.5%) / (1 + 6%)

= 1.35 × (1 + 0.065) / (1 + 0.06)

= 1.35 × 1.065/1.06

= 1.35 × 1.0047

= 1.356345

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