Suppose the spot and six-month forward rates on the Norwegian krone are Kr 5.77 and Kr 5.92, respectively. The annual risk-free rate in the United States is 3.57 percent, and the annual risk-free rate in Norway is 5.27 percent. What would the six-month forward rate need to be on the Norweigan krone to prevent arbitrage?

Suppose the spot and six-month forward rates on the Norwegian krone are Kr 5.77 and Kr 5.92, respectively. The annual risk-free rate in the United States is 3.57 percent, and the annual risk-free rate in Norway is 5.27 percent. What would the six-month forward rate need to be on the Norweigan krone to prevent arbitrage?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 1ST

See similar textbooks