Assume the spot rate between the U.S. dollar and the Taiwan dollar is $1 = TWD32.456. If the interest rate in the United States is 4 percent and in Taiwan is 3 percent, then what should be the one-month forward exchange rate?

Question

Quizplus · Accepted Answer

The correct answer is A because the forward exchange rate should be $0.0308, which is calculated as the spot rate multiplied by the ratio of (1 + foreign interest rate) to (1 + domestic interest rate).

Assume the Spot Rate Between the U