Question

The one-year interest rate in the U.K. is 5.0 percent. The spot exchange rate is $1.40/£ and the one-year forward exchange ra

0 0
Add a comment Improve this question Transcribed image text
Answer #1

1 + U Sinterest Rate Forward Rate = Spot Rate * G 1+UKInterest Rate

1.35 = 1.40* 1 + U Sinterest Rate 1 +0.05

1.35 = 1.33333333333 * (1+ US Rate )

1.35 = 1.33333333333 + US Rate* 1.33333333333

US Rate = (1.35  - 1.33333333333) / 1.33333333333

US Rate = 0.0125 OR 1.25%

NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.

Add a comment
Know the answer?
Add Answer to:
The one-year interest rate in the U.K. is 5.0 percent. The spot exchange rate is $1.40/£...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT