The one-year forward exchange rate is Rupees 40/$. If the one-year interest rate in the United States is 4% and in India is 7%, what is the spot exchange rate so as to preclude arbitrage?
A) Rupees 38.88/$
B) Rupees 39.01/$
C) Rupees 39.23/$
D) Rupees 39.32/$
Correct Answer:
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