(Answered) Suppose that the interest rate of government bonds in the

Economics

Suppose that the interest rate of government bonds in the Euro Area at 1 year maturity is 10%, or i_€=0.10 At the same time , the interest rate of government bonds in the USA at 1 year maturity is 5%, or i_$=0.05

Suppose that the spot exchange rate between Euro € and US Dollar $ is, in US Dollars, 1€=$1.37 The Forward Rate - according to the Covered Interest Parity - is [x]

a. Selling at Premium

b. Selling at Discount

c. Equal to the Spot rate

d. Not enough information

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