You are given that the annual Australian dollar interest rate is 1% and the United States annual interest rate is 2.5%. The spot rate for the United States dollar is SA1.20. (a) Using interest rate parity, calculate the forward rate premium of the United States dollar with respect to the Australian dollar.
You are given that the annual Australian dollar interest rate is 1% and the United States annual interest rate is 2.5%. The spot rate for the United States dollar is SA1.20. (a) Using interest rate parity, calculate the forward rate premium of the United States dollar with respect to the Australian dollar.
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 57QA
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