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

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92425872

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