Ask Question
17 November, 19:58

The current U. S. dollar / Chinese yuan currency spot rate is $0.130 per yuan. The fair value price for the U. S. dollar / Chinese yuan exchange rate for a 2-year forward contract is $0.1408. If the U. S. dollar denominated annual interest rate is 6.0%, the Chinese yuan-denominated annual interest rate must be 3%.

a) true

b) false

+4
Answers (1)
  1. 17 November, 20:28
    0
    b) false

    Explanation:

    US annual interest rate 6% = (1 + 6%) ² = 1.1236

    Chinese annual interest rate 3% = (1 + 3%) ² = 1.0609

    (1.1236 / 1.0609) x $0.130 per yuan = 1.0591 x $0.130 per yuan = $0.1377 per yuan

    The spot rate is the current exchange rate, while the forward rate is the expected future exchange rate.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “The current U. S. dollar / Chinese yuan currency spot rate is $0.130 per yuan. The fair value price for the U. S. dollar / Chinese yuan ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers