Question
Assume that US securities have an 9% per annum of interest rate, whereas UK securities have...
Assume that US securities have an 9% per annum of interest rate, whereas UK securities have a 11% rate. In spot market, US$1 can be exchanged for GBP 0.875. What is the 120-days forward exchange rate between USD and GBP? Is the GBP selling price at a premium or discount on the forward exchange rate?
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