Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN: 9781305635937
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 17, Problem 12P

a.

Summary Introduction

To determine: The forward rate for 90 days.

Introduction:

Interest Rate Parity:

It refers to that theory, which indicates the difference of interest rates provided by two different countries is to be same as the difference of two types of the exchange rate, which are forward exchange rate and spot exchange rate.

Forward Exchange Rate:

This rate indicates the pre-decided rate of exchange for currencies of two countries for a date in nearby future.

b.

Summary Introduction

To identify: The 90-day forward exchange rate indicates exchange at premium or discount in comparison of spot rate.

Introduction:

Spot Exchange Rate:

This rate indicates that particular rate to get exchange the currency of foreign country at the current date.

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