Suppose the spot rates for the pound, mark, and Swiss franc prior to 1999 were $$.32, and $.40, respectively. At the same time, the associated 90-day interest rates (annualized) were 16%, 8%, and 4%, while the U.S. 90-day interest rate was 12%. What was the 90-day forward rate (to the nearest cent) on a TCU (TCU 1 = £1 + DM1 + SFr1) if interest parity were to hold?
A) $1.92
B) $1.98
C) $1.94
D) $1.87

Question

Quizplus · Accepted Answer

The Answer of Suppose the spot rates for the pound, mark, and Swiss franc prior to 1999 were $$.32, and $.40, respectively. At the same time, the associated 90-day interest rates (annualized) were 16%, 8%, and 4%, while the U.S. 90-day interest rate was 12%. What was the 90-day forward rate (to the nearest cent) on a TCU (TCU 1 = £1 + DM1 + SFr1) if interest parity were to hold?
A) $1.92
B) $1.98
C) $1.94
D) $1.87

Suppose the Spot Rates for the Pound, Mark, and Swiss $$32, and