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Suppose 90-day investments in Europe have a 5% annualized return and a 1.25% quarterly (90-day) return. In the United States, 90-day investments of similar risk have a 7% annualized return and a 1.75% quarterly return. In today’s 90-day forward market, 1 euro equals $1.32. If interest rate parity holds, what is the spot exchange rate ($/€)?

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Financial Management, Finance

Category:- Financial Management
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