he following are the spot and the swap forward rates of the ZAR/EUR Spot 15.7500–15.9500 One-month 400–205 This means that the rand is selling at a forward discount. the rand is selling at a forward premium. the euro dollar is selling at a forward discount. Both b) and c) after allowing for transaction costs, both currencies sell at par.

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter7: International Arbitrage And Interest Rate Parity
Section: Chapter Questions
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The following are the spot and the swap forward rates of the ZAR/EUR 
Spot                                        15.7500–15.9500 
One-month                           400–205 
This means that
   
the rand is selling at a forward discount.
   
the rand is selling at a forward premium.
   
the euro dollar is selling at a forward discount.
   
Both b) and c)
   
after allowing for transaction costs, both currencies sell at par.
 
 
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