Calculate the 1-year forward rate

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Assume 1-year interest rates in India and Singapore are 3% and 6%, respectively. Clearly, the interest rate in India is much lower than the interest rate in Singapore by 3%. Due to the significant interest rate differences between these 2 countries, several firms in Singapore have decided to borrow INR to finance their expansions rather than to get the borrowings from their home country. The current spot rate is INR54.0410/SGD.

Calculate the 1-year forward rate. From your answer, explain this forward rate as to be an unbiased predictor (UFR) of the INR/SGD future spot rate in relation to the interest rate parity (IRP).

Reference no: EM132743468

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