What should forward premium be for IRP to hold

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Reference no: EM131500923

Use the following information to answer the next two questions.

An investment banker in Spain notices that 1 year interest rates in Spain and Mexico are 12% and 8%, respectively. Current spot rates are as follows:

€1.02/$, $.15/MP

The one year forward rate is €.18/MP and the expected spot rate one year from now is €.14/MP.

What should the forward premium be for IRP to hold?

.037

-.0357

.04

-.04

Reference no: EM131500923

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