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What is the 3 year forward exchange rate

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Reference no: EM132460102

Suppose that the spot GBP/EUR rate is S0 = 1.2, and the 3 year risk free interest rates are rEUR =2% and rGBP = 3%.

  • What is the 3 year forward exchange rate, also written as 0F3?
  • Show that arbitrage is not possible assuming that you could alternately invest in the bank using the spot rates provided

Reference no: EM132460102

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