0.58£/C$ is the real Canadian dollar-British spot rate.If Canada 's actual nominal one-year interest rate...

0.58£/C$ is the real Canadian dollar-British spot rate. If Canada 's actual nominal one-year interest rate is 2% and Britain's equivalent rate is 3%, then what's the estimated 90-day forward exchange rate?

Expert Solution

90-day forward rate = Real Spot Rate * [(1 + Britain Rate) / (1 + Canadian Rate)]^(90/360)

= 0.58£/C$ * [(1+0.03)/(1+0.02)]^(90/360)

= 0.58£/C$ * [1.0098]^0.25

= 0.58£/C$ * 1.0024

= 0.5814£/C$

jeff jeffy answered 2 years ago

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