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Calculating the cost of delivering the foreign currency

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Consider two markets; a local market and a foreign market. In both markets the rates are reported based on annual compounding, The 1-year spot rates are: RL=IJ.04 in the local market, and RF=I].08 in the foreign market. The spot exchange rate is F0=1.06 of the local currency per one unit of the foreign currency. A forward contract to deliver, in 1 year from the current time, one unit of the foreign currency, is written with a forward price of FF=? of the local currency per one unit of the foreign currency.

(a) Determine what the forward price FF should be by calculating the cost of delivering the foreign currency.

Reference no: EM133076531

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