Assume the spot rate for the British pound is currently 15604 while the year forward rate...

Question

Question

business accounting

Answer 1

Answer #1

As per Interest rate parity, Forward rate = Spot rate*(1+Interest rate Britain)/(1+Interest rate US)

1.5587 = 1.5604*(1+Interest Rate Britain)/(1+2.6%)

Interest rate in Britain = 2.4882%

i.e. 2.49%

Answer 2

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