One year interest rates are 2% in the US and 4% in the UK. The spot USD/GBP rate is $1.39. What is the one year forward price? A. 1.3223 B. 1.3543 C. 1.3633 D. 1.4173
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Step 1
First, we need to calculate the interest rate differential between the US and the UK: 4% - 2% = 2% This means that the UK interest rate is 2% higher than the US interest rate. Show more…
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