Suppose you have INR 10millions that you can invest in for one year anywhere in the world without any restriction. You are considering to either investing in the US or in India. The interest rate on one-year bonds in India is 9% and on one-year bonds in the US is 8%. The current exchange rate is INR 74.525/USD. What should be the one-year forward rate so that you earn the same return whether you invest in India or in the US. a. 73.84128 b. 74.525 c. 75.21505 d. All the options are wrong e. 70.12125
Suppose you have INR 10millions that you can invest in for one year anywhere in the world without any restriction. You are considering to either investing in the US or in India. The interest rate on one-year bonds in India is 9% and on one-year bonds in the US is 8%. The current exchange rate is INR 74.525/USD. What should be the one-year forward rate so that you earn the same return whether you invest in India or in the US. a. 73.84128 b. 74.525 c. 75.21505 d. All the options are wrong e. 70.12125
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 1ST
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Suppose you have INR 10millions that you can invest in for one year anywhere in the world without any restriction. You are considering to either investing in the US or in India. The interest rate on one-year bonds in India is 9% and on one-year bonds in the US is 8%. The current exchange rate is INR 74.525/USD. What should be the one-year forward rate so that you earn the same return whether you invest in India or in the US.
a.
73.84128
b.
74.525
c.
75.21505
d.
All the options are wrong
e.
70.12125
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