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1. Assume that the spot exchange rate is $25/€, rus is 9% and rEis 11% then...

1. Assume that the spot exchange rate is $25/€, rus is 9% and rEis 11% then the forward exchange rate the banks will quote is f  =  _______

1.21 1.22 1.23 none of these

2. Assume that the spot exchange rate is $35/€, rusis 8% and rEis 6% then the forward exchange rate the banks will quote is f  =  ______

1.355 1.375   1.395 none of these

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Answer #1

1. $1.23 [That is $1.25 x 1.09 / 1.11, assuming the question should state spot exchange rate as $1.25/€, and not $25/€]

2. $1.375 [That is $1.35 x 1.08 / 1.06, assuming the question should state spot exchange rate as $1.35/€ and not $35/€]

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