Suppose that the one-year interest rate in Australia is 7.66% p.a. and in New Zealand, it is 8.63% p.a. Suppose also that the current spot rate is EAUD/NZD=1.1578 and the current 12-month forward rate is FAUD/NZD=1.046. Assuming there are no transaction costs, which of the following is true?
Suppose that the one-year interest rate in Australia is 7.66% p.a. and in New Zealand, it is 8.63% p.a. Suppose also that the current spot rate is EAUD/NZD=1.1578 and the current 12-month forward rate is FAUD/NZD=1.046. Assuming there are no transaction costs, which of the following is true?
Chapter16: The Markets For Labor, Capital, And Land
Section: Chapter Questions
Problem 12P
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Suppose that the one-year interest rate in Australia is 7.66% p.a. and in New Zealand, it is 8.63% p.a. Suppose also that the current spot rate is EAUD/NZD=1.1578 and the current 12-month forward rate is FAUD/NZD=1.046. Assuming there are no transaction costs, which of the following is true? | ||||||||||||
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The correct answer is B please explian it and show your calculation process
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