The nominal annual interest rate on 6-month USD Treasury Bill is 4.50%. The spot rate of the Euro is $3.8643, and the 6-month forward rate of the Euro is $3.8880. If interest rate parity holds, what is the nominal annual interest rate on a risk and default free 6-month Euro bonds? 12.35% 10.20% 2.20% 3.25%
The nominal annual interest rate on 6-month USD Treasury Bill is 4.50%. The spot rate of the Euro is $3.8643, and the 6-month forward rate of the Euro is $3.8880. If interest rate parity holds, what is the nominal annual interest rate on a risk and default free 6-month Euro bonds? 12.35% 10.20% 2.20% 3.25%
Chapter22: International Financial Management
Section: Chapter Questions
Problem 1P
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The nominal annual interest rate on 6-month USD Treasury Bill is 4.50%. The spot rate of the Euro is $3.8643, and the 6-month forward rate of the Euro is $3.8880. If interest rate parity holds, what is the nominal annual interest rate on a risk and default free 6-month Euro bonds?
12.35%
10.20%
2.20%
3.25%
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