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QUESTION
On February 4 of a particular year, the spot rate for U. dollars ($) expressed in euros () was $0.7873/. The U. interest rate (compounded...
On February 4 of a particular year, the spot rate
for U.S. dollars ($) expressed in euros (€) was
$0.7873/€. The U.S. interest rate (compounded
semiannually) was 5.36 percent, whereas the euro
interest rate (compounded semiannually) was
3.11 percent. From a European perspective, what
should be the forward rate of a contract that
expires September 4? (Assume that each month
is one-twelfth of a year.)
