overnment securities are one-year bonds, paying the face value of the bond one year from now. The exchange rate E is 83 rupees per pound and after a year, it is expected to decrease to 79. Assume India is the domestic country. The face values and prices on the two bonds are given by: Face Value Price India 1-year bond ₹10,000 ₹9,345.79 Britain 1-year bond £13,000 £11,818.18 e. What is the equilibrium forward rate, according to the exact version of covered interest parity? f. Calculate the forward premium, using the forward rate you obtained i

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A: The conceptual formula used:

Q: Assume that interest rate parity holds. In both the spot market and the 90-day forward market, 1…

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