Interest Rate Parity Assume that interest rate parity holds and that 90-day risk-free securities yield 6% in the United States and 6.2% in Germany. In the spot market, 1 euro equals $1.37. What is the 90-day forward rate? Do not round intermediate calculations. Round your answer to four decimal places. $ Is the 90-day forward rate trading at a premium or discount relative to the spot rate?
Interest Rate Parity Assume that interest rate parity holds and that 90-day risk-free securities yield 6% in the United States and 6.2% in Germany. In the spot market, 1 euro equals $1.37. What is the 90-day forward rate? Do not round intermediate calculations. Round your answer to four decimal places. $ Is the 90-day forward rate trading at a premium or discount relative to the spot rate?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Interest Rate Parity
Assume that interest rate parity holds and that 90-day risk-free securities yield 6% in the United States and 6.2% in Germany. In the spot market, 1 euro equals $1.37.
What is the 90-day forward rate? Do not round intermediate calculations. Round your answer to four decimal places.
$
Is the 90-day forward rate trading at a premium or discount relative to the spot rate?
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