The US interest rate is 0.75%. The British interest rate is 0.25%. The spot rate is...
- The US interest rate is 0.75%.
The British interest rate is 0.25%.
The spot rate is $1.1639/£.
Calculate the forward rate assuming interest rate parity holds.
Homework Answers
Ans $1.1697 / £
| Forward Rate = | Spot Rate * ( 1 +US interest) / ( 1 + pound interest) |
| 1.1639 * ( 1 + 0.75%) / ( 1 + 0.25%) | |
| 1.1697 | |
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