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What is the value of the forward exchange rate

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Reference no: EM132504264

Suppose the 5-year interest rate on a dollar-denominated pure discount bond is 4.5% p.a., whereas in France, the euro interest rate is 7.5% p.a. on a similar pure discount bond denominated in euros. If the current spot rate is $1.08/€, what is the value of the forward exchange rate that prevents covered interest arbitrage?

Reference no: EM132504264

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