Suppose the spot and six-month forward rates on the Norwegian krone are Kr 5.77 and Kr 5.92, respectively. The annual risk-free rate in the United States is 3.57 percent, and the annual risk-free rate in Norway is 5.27 percent. What would the six-month forward rate need to be on the Norweigan krone to prevent arbitrage?
Suppose the spot and six-month forward rates on the Norwegian krone are Kr 5.77 and Kr 5.92, respectively. The annual risk-free rate in the United States is 3.57 percent, and the annual risk-free rate in Norway is 5.27 percent. What would the six-month forward rate need to be on the Norweigan krone to prevent arbitrage?
Chapter22: International Financial Management
Section: Chapter Questions
Problem 2P
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Suppose the spot and six-month forward rates on the Norwegian krone are Kr 5.77 and Kr 5.92, respectively. The annual risk-free rate in the United States is 3.57 percent, and the annual risk-free rate in Norway is 5.27 percent. What would the six-month forward rate need to be on the Norweigan krone to prevent arbitrage? |
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