Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 27, Problem 12P
Summary Introduction

To determine: The 90-day forward rate and whether the 90-day forward rate trading at a premium or a discount relative to the spot rate.

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Assume that interest rate parity holds and that 90-day risk-free securities yield 3% in the United States and 3.3% in Germany. In the spot market, 1 euro equals $1.50. What is the 90-day forward rate?
Assume that interest rate parity holds and that 90-day risk-freesecurities yield a nominal annual rate of 3% in the United States and a nominal annual rateof 3.5% in the United Kingdom. In the spot market, 1 pound = $1.29.a. What is the 90-day forward rate?b. Is the 90-day forward rate trading at a premium or a discount relative to the spot rate?
Assume that interest rate parity holds and that the 90-day risk-free securities yield is 5% in the United States and 5.3% in Germany. In the spot market, 1 euro equals $1.40 (1.4 dollars per euro).                 What is the 90-day forward rate?                                 rh 1.25% 5.0%           rf 1.33% 5.3%           Euro 0.7143 $1.40           Spot Rate               Forward Rate 1.943396                             Is the 90-day forward rate trading at a premium or a discount relative to the spot rate?
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