Suppose you observe a spot exchange rate of $1.0500/€.If interest rates are 5% APR in the U.S.and 3% APR in the euro zone,what is the no-arbitrage 1-year forward rate?
A)€1.0704/$
B)$1.0704/€
C)€1.0300/$
D)$1.0300/€

Name: Suppose you observe a spot exchange rate of $1.0500/€.If interest rates are 5% APR in the U.S.and 3% APR in the euro zone,what is the no-arbitrage 1-year forward rate? A)€1.0704/$ B)$1.0704/€ C)€1.0300/$ D)$1.0300/€
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Question

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The Answer is B

Suppose You Observe a Spot Exchange Rate of $1