Reflect current conditions in the financial markets

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Reference no: EM133638010

Question

Assume that the rates shown below accurately reflect current conditions in the financial markets. Dollar/Euro Spot Rate 1.21 Dollar/Euro 1-Year Forward Rate 1.18 1-Year Deposit Rate: Euro 3% U.S. 2% the one-year forward dollarâ€"euro exchange rate is mispriced, because it doesnâ€^TMt reflect the interest rate differentials between the United States and Europe. Calculate the value that the forward rate would need to be in order to keep riskless arbitrage from occurring.

Reference no: EM133638010

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