The spot rate is $1.60/£. Three-month interest rate in the US is 6% while the three-month interest rate in the UK is 8%, both in continuously compounded terms. What is the arbitrage-free three-month forward price? O 1.608 O 1.568 O 1.592 O None of these O 1.632

The spot rate is $1.60/£. Three-month interest rate in the US is 6% while the three-month interest rate in the UK is 8%, both in continuously compounded terms. What is the arbitrage-free three-month forward price? O 1.608 O 1.568 O 1.592 O None of these O 1.632

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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Question

The spot rate is $1.60/£. Three-month interest rate in the US is 6% while the three-month interest rate in the UK is 8%, both in
continuously compounded terms. What is the arbitrage-free three-month forward price?
O 1.608
O 1.568
O 1.592
O None of these
O 1.632

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