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Chako Chako
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8 years ago
Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro. Further, assume that the spot exchange rate is $1.05 per euro, and the interest rate on dollar deposits is 10 percent and on euro it is 4 percent. Under these assumptions
A) interest parity does hold.
B) interest parity does not hold.
C) interest parity fluctuates.
D) Not enough information is given to answer the question.
E) it is hard to tell whether interest parity does or does not hold.
Textbook 
International Economics: Theory and Policy

International Economics: Theory and Policy


Edition: 10th
Author:
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machukianmachukian
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8 years ago
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Chako Author
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#2
8 years ago
Correct!
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#3
7 years ago
Don't forget to vote my answer as best Nerd Face
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