Annualized interest rates in the us and france on january 1, Ask an Expert

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Annualized interest rates in the U.S. and France on January 1, 1991 are 9% and 13%, respectively. The spot value of the franc is 0.1109 per dollar. (Please assume that the franc is worth 0.1109$. Use this exchange rate for all sub-questions)

c) At what one-year forward rate will covered interest rate parity hold?

d) Suppose the one-year exchange rate is expected to increase to $0.15 due to lower U.S. inflation. Do you want to buy or sell forward?

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Financial Management, Finance

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