Find the forward rate of foreign currency Y if the spot rate is $4.50,the domestic interest rate is 6 percent,the foreign interest rate is 7 percent,and the forward contract is for nine months.
A)$4.458
B)$5.104
C)$4.468
D)$4.532
E)none of the above

Question

Quizplus · Accepted Answer

Using the formula for calculating the forward rate:

Forward rate = spot rate x (1 + foreign interest rate) / (1 + domestic interest rate)

Plugging in the given values, we get:

Forward rate = 4.50 x (1 + 0.07) / (1 + 0.06)^(9/12)
Forward rate = 4.468

Therefore, the forward rate of foreign currency Y is $4.468. The closest answer choice to this calculation is C) $4.468.

Find the Forward Rate of Foreign Currency Y If the Spot