Question

A European investor can earn a 4.75% annual interest rate in Europe or 2.75% per year in the United States. If the spot exchange rate is $1.58 per euro, at what one-year forward rate would an investor be indifferent between the U.S. and Japanese investments?
A. $1.5484
B. $1.6108
C. $1.5335
D. $1.5498
E. $1.5977

Answer

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