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Suppose 90 day investments in Europe have an annualized returnof 6 percent and a quarterly

Suppose 90 day investments in Europe have an annualized returnof 6 percent and a quarterly

Suppose 90 day investments in Europe have an annualized returnof 6 percent and a quarterly (90-day) return of 1.5 percent. In theU.S., 90-day investments of similar risk have an annualized returnof 9 percent and a quarterly return of 2.25 percent. In today's 90day forward market, 1 euro equals $1.37.

If interest rate parity holds, what is the spot exchange rate($/E)? ROUND TO FOUR DECIMAL PLACES.

Abhinav 04-Dec-2019

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