In: Finance
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?
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$