Ask Question
9 March, 18:51

An exchange rate is 0.7000 and the six - month domestic and foreign risk - free interest rates are 5% and 7% (both expressed with continuous compounding). What is the six - month forward rate

+4
Answers (1)
  1. 9 March, 21:05
    0
    0.693

    Explanation:

    Given that

    Exchange rate = 0.7

    Interest Rates = 5% and 7%

    The calculation of six-month forward rate is shown below : -

    = Spot Rate x e^ (Domestic Rate - Foreign Rate) x Domestic Rate

    = 0.7 x e^ ((0.05 - 0.07) x 0.05)

    = 0.7 x e^ - 0.001

    = 0.7 x 0.99

    = 0.693

    Hence, the six-month forward rate is 0.693. we simply find the six moth rate by applying the formula.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “An exchange rate is 0.7000 and the six - month domestic and foreign risk - free interest rates are 5% and 7% (both expressed with ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers