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What is the one-year forward exchange rate

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1. The spot rate quoted at the Bangkok International Airport is THB 43/USD [THB = Thai baht]. If the current nominal one-year interest rate in the U.S. is 2% and the comparable rate in Thailand is 10%, what is the one-year forward exchange rate, if Interest Rate Parity holds? [Assume indirect quote]

THB 46.37/USD

THB 51.60/USD

THB 39.87/USD

THB 43.00/USD

2. Peter Simpson thinks that the U.K. pound will cost $1.43/£ in six months. A 6-month currency futures contract is available today at a rate of $1.44/£. If Peter was to speculate in the currency futures market, and his expectations are correct, which of the following strategies would earn him a profit?

Sell a pound currency futures contract.

Sell pounds in six months.

Buy a pound currency futures contract.

Sell pounds today.

Reference no: EM131896658

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