Answer: 1.1523

The correct answer is D: 1.1523. According to the interest rate parity theory, the forward exchange rate (F) can be calculated using the formula: \( F = S \times \left(\frac{1 + R_{USD}}{1 + R_{EUR}}\right)^T \), where: - \( S \) is the spot exchange rate (1.13 USD per EUR in this case), - \( R_{USD} \) is the USD risk-free rate (2.7% per year), - \( R_{EUR} \) is the EUR risk-free rate (1.7% per year), - \( T \) is the time to delivery (2 years in this scenario). Plugging the given values into the formula, we get: \[ F = 1.13 \times \left(\frac{1 + 0.027}{1 + 0.017}\right)^2 = 1.1523 \] This calculation shows that the 2-year forward USD per EUR exchange rate, based on the current spot rate and the risk-free interest rates for both currencies, is 1.1523. The other options (A, B, and C) represent incorrect calculations or assumptions about the rates and time periods involved.

Author: LeetQuiz Editorial Team