Answer: 1.1523

The correct answer to the question is D, which is 1.1523. This is determined using the interest rate parity theorem, which states that the forward exchange rate (Ft) can be calculated using the formula: \[ F = \frac{(1 + R_{USD})^T}{(1 + R_{EUR})^T} \times S \] where: - \( S \) is the spot exchange rate, which is 1.13 USD per EUR 1 in this case. - \( R_{USD} \) is the USD risk-free rate, which is 2.7% per year. - \( R_{EUR} \) is the EUR risk-free rate, which is 1.7% per year. - \( T \) is the time to delivery, which is 2 years in this scenario. Substituting the given values into the formula, we get: \[ F = \frac{(1 + 0.027)^2}{(1 + 0.017)^2} \times 1.13 = 1.1523 \] This calculation shows that the 2-year forward USD per EUR 1 exchange rate, according to the interest rate parity theorem, is 1.1523. The other options (A, B, and C) are incorrect as they represent different scenarios or rates that do not align with the given conditions and the interest rate parity theorem.

Author: LeetQuiz Editorial Team