Forward Rates for Different Time Horizons Assume that interest rate parity (IRP) exists. Assume this information provided by today’s Wall Street Journal: Spot rate of British pound ¼ $1.80 6-month forward rate of pound = $1.82 12-month forward rate of pound = $1.78
a. Is the annualized 6-month U.S. risk-free interest rate above, below, or equal to the British risk-free interest rate?
b. Is the 12-month U.S. risk-free interest rate above, below, or equal to the British risk-free interest rate?
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