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Home / Questions / IRP. The one-year risk-free interest rate in Australia is 10%. The one-year risk-free rat...

IRP. The one-year risk-free interest rate in Australia is 10%. The one-year risk-free rate in the U.S. is 3%. Assume that interest rate parity exists. The spot rate of the Australian dollar is

IRP.

The one-year risk-free interest rate in Australia is 10%. The one-year risk-free rate in the U.S. is 3%. Assume that interest rate parity exists. The spot rate of the Australian dollar is $.79. Show all work.

A. What is the forward rate premium?

B. What is the one-year forward rate of the dollar?

 

Jun 01 2021 View more View Less

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