Today, the spot price of the EUR/USD exchange rate is $1.0796. The bid and ask quotes for the nine-month EUR/USD forward contracts are, respectively, 73.56 and 75.68. According to the interest rate parity, what is the implied foreign interest rate differential? Recall that quotes are reported in basis points, which is the common practice in the FX market. (a) 0.92% (b) 0.51% (c) 1.37% (d) 2.73% 18
Today, the spot price of the EUR/USD exchange rate is $1.0796. The bid and ask quotes for the nine-month EUR/USD forward contracts are, respectively, 73.56 and 75.68. According to the interest rate parity, what is the implied foreign interest rate differential? Recall that quotes are reported in basis points, which is the common practice in the FX market. (a) 0.92% (b) 0.51% (c) 1.37% (d) 2.73% 18
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:18. Today, the spot price of the EUR/USD exchange rate is $1.0796. The bid and ask quotes for
the nine-month EUR/USD forward contracts are, respectively, 73.56 and 75.68. According to the
interest rate parity, what is the implied foreign interest rate differential?
Recall that quotes are reported in basis points, which is the common practice in the FX market.
(a) 0.92%
(b) 0.51%
(c) 1.37%
(d) 2.73%
18
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