Interest rate parityassume that interest rate parity holds, Ask an Expert

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Interest Rate Parity

Assume that interest rate parity holds and that 90-day risk-free securities yield 4% in the United States and 4.5% in Germany. In the spot market, 1 euro equals $1.30 dollar.

A) Is the 90-day forward rate trading at a premium or discount relative to the spot rate?

B) What is the 90-day forward rate? Round your answer to four decimal places.

$ ____________

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Financial Management, Finance

Category:- Financial Management
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