Suppose the bank interest rates in America and India are 4.5% and 8.5% respectively. The spot market…
The approximate twelve-month forward rate is ₹ 64.48 per US dollar. Interest-rate parity gives \(F\) \(=S\frac{1+r_{\mathrm{India}}}{1+r_{\mathrm{US}}}\)…
Choose your answer
Suppose the bank interest rates in America and India are 4.5% and 8.5% respectively. The spot market exchange rate is ₹ 62.10 per US dollar. What would be the approximate twelve-month forward rate in rupees per US dollar ?
Answer and explanation
Correct answer B
The approximate twelve-month forward rate is ₹ 64.48 per US dollar. Interest-rate parity gives . Rounding this value to two decimal places gives 64.48.
Practice for these exams
-
Maharashtra and Goa SET (MH SET)