Question
In: Finance
Based on the information above, do you think that IRP holds or not? Please show your formula and calculation.
Exchange Rate | Interest Rate (APR) | |
S0($/€) | $1.50=€1.00 | i$=2% |
F360($/€) | $1.58=€1.00 | i€=4% |
Based on the information above, do you think that IRP holds or not? Please show your formula and calculation.
Solutions
Expert Solution
Forward rate= spot rate (1+interest in Dollar)/(interest in euro)
= 1.50(1.02)/(1.04)
=$1.4711
The given forward rate is $1.58, so it can be said that it there is no interest rate parity that is holding and there is a discrepancy
jeff jeffy answered 2 years agoRelated Solutions
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