Assume the current spot price on the Brazilian Real is $.455. The annual risk-free rate inthe US is 3.3% and in Brazil the risk-free rate is 2.5%. Assume both T-bills are risk-free. A.What should be the one year forward price of the Real?

Assume the current spot price on the Brazilian Real is $.455. The annual risk-free rate inthe US is 3.3% and in Brazil the risk-free rate is 2.5%. Assume both T-bills are risk-free. A.What should be the one year forward price of the Real?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 37QA

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Assume the current spot price on the Brazilian Real is $.455. The annual risk-free rate inthe US is 3.3% and in Brazil the risk-free rate is 2.5%. Assume both T-bills are risk-free.

A.What should be the one year forward price of the Real?

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