Reddit

Q.2825 Suppose that the Euro spot is $1.3988. The 1-year EURO T-bill is quoted at 2.28%, while the 1-year USD T-bill is quoted at 3.33%. What is the EUR/USD forward exchange rate? | Financial Risk Manager Part 2 Quiz - LeetQuiz

Explanation:

Spot Exchange Rate (S) = $1.3988 per Euro
Interest Rate in the United States (USD T-bill rate) = 3.33%
Interest Rate in the Euro Area (Euro T-bill rate) = 2.28%

\therefore F = S \times \frac{1 + r_{\text{USD}}}{1 + r_{\text{EUR}}} = 1.3988 \times \frac{1.0333}{1.0228} \approx \text{USD } 1.4132 \text{ per EUR}

Comments (0)

No comments yet.