Suppose the spot rates on January 1, 1992 for the pound, mark, and Swiss franc were $$.42, and $.48, respectively. At the time, the associated 90-day interest rates (annualized) were 12%, 6%, and 4%, while the U.S. 90-day interest rate (annualized) was 8%. What was the 90-day forward rate on a DCU (DCU 1 = £1 + DM1 + SFr1) if interest parity were to hold?
A) $2.4027
B) $2.3923
C) $2.4196
D) $2.3738
Correct Answer:
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