If the 182-day interest rate is 1.75% in the United States and 2.625% in Germany, and the current spot exchange rate between dollars and euros is $0.583, what will the 180-day forward rate be if IRP holds?

Question

Quizplus · Accepted Answer

The 180-day forward rate, if Interest Rate Parity (IRP) holds, can be calculated using the formula: Forward Rate = Spot Rate * (1 + Interest Rate Domestic) / (1 + Interest Rate Foreign). Plugging in the given values: $0.583 * (1 + 0.0175) / (1 + 0.02625) = $0.578.

If the 182-Day Interest Rate Is 1