Assume that interest rates in the USA are 7.5% and in China are 3.5%.  According to the Interest Rate Parity (IRP): a. what will be the PREMIUM or DISCOUNT of the forward rate?  b. If the SPOT exchange rate of the Chinese Yuan (CNY) is 0.159177 dollars (USD) per Yuan (CNY), what will be the forward exchange rate in one year of the Yuan (CNY)? The alternatives are: a. Premium of 3.864734% and Forward exchange rate 0.165328768 CNY/USD. b. Premium of 3.864734% and Forward exchange rate 0.165328768 USD/CNY c. Discount of 3.72093% and Forward Exchange Rate 0.153254135 CNY/USD d. Discount of 3.72093% and Forward Exchange Rate 0.153254135 USD/CNY Please detail each of your calculations

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Assume that interest rates in the USA are 7.5% and in China are 3.5%. 
According to the Interest Rate Parity (IRP):
a. what will be the PREMIUM or DISCOUNT of the forward rate? 
b. If the SPOT exchange rate of the Chinese Yuan (CNY) is 0.159177 dollars (USD) per Yuan (CNY), what will be the forward exchange rate in one year of the Yuan (CNY)?
The alternatives are:
a. Premium of 3.864734% and Forward exchange rate 0.165328768 CNY/USD.
b. Premium of 3.864734% and Forward exchange rate 0.165328768 USD/CNY
c. Discount of 3.72093% and Forward Exchange Rate 0.153254135 CNY/USD
d. Discount of 3.72093% and Forward Exchange Rate 0.153254135 USD/CNY
Please detail each of your calculations

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