The foreign exchange market and the money market

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The foreign exchange market and the money market (the market in which you can borrow or lend in USD or Euro) are very efficient: so there is no room for arbitrage. The spot exchange rate between USD and Euro as of today is $0.9/Euro. The one-year interest rate is 6% for USD, and 3% for Euro. Please estimate today’s one-year forward exchange rate between the USD and the Euro, using CIA parity condition.

Reference no: EM131101419

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