The current (spot) exchange rate is 1.2 dollars per euro, the 6-month forward exchange rate is 1.195 dollars per euro, the 6-month dollar interest rate is 1% per annum (continuous). The (no-arbitrage) 6-month euro interest rate (per annum continuous) is (a) 0.018% (b) 1.004% (c) 1.139% (d) 1.418% (e) 1.835%
The current (spot) exchange rate is 1.2 dollars per euro, the 6-month forward exchange rate is 1.195 dollars per euro, the 6-month dollar interest rate is 1% per annum (continuous). The (no-arbitrage) 6-month euro interest rate (per annum continuous) is (a) 0.018% (b) 1.004% (c) 1.139% (d) 1.418% (e) 1.835%
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
Problem 1PS
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The current (spot) exchange rate is 1.2 dollars per euro, the 6-month forward exchange rate is 1.195 dollars per euro, the 6-month dollar interest rate is 1% per annum (continuous). The (no-arbitrage) 6-month euro interest rate (per annum continuous) is (a) 0.018% (b) 1.004% (c) 1.139% (d) 1.418% (e) 1.835%
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