Question
According to the Interest Rate Parity (IRP) theory, if
the 1-year risk-free interest rate in India is 10% and the 1-year risk-free interest rate in the USA is 4%, and the current Spot Rate is ₹83/USD, what should be the 1-year Forward Rate?Solution
The currency of the country with the higher interest rate (India) should trade at a forward discount, and the currency with the lower interest rate (USA) should trade at a forward premium. Forward rate = Spot x (1+Home interest rate / 1+ Foreign interest rate) = 83 x ((1+0.10) / (1 + 0.04) = 87.80 Since Forward rate > Spot rate, there is forward premium. The USD is at a premium of approximately 5.7% because the interest rate differential must be offset by the exchange rate change to prevent arbitrage.
A group consists of 6 boys and 8 girls. In how many ways can 2 boys and 3 girls be selected from the group?
In how many ways can the letters of the word ‘MEDICAL’ be rearranged so that the vowels never come together?
In how many ways can a group of 2 boys and 2 girls be made out of a total of 6 boys and 4 girls?
- How many four-letter words without repetition having exactly two vowels can be formed by using the letters of the word "MEASURE"?
How many three-letter words can be formed such that all letters are vowels, and no two letters are the same?
How many four-letter words without repetition having exactly two vowels can be formed by using the letters of the word "SEMINAR"?
From 6 men and 5 women, a committee of 4 is formed. In how many ways can it be formed with at least 2 women?
Eight dancers out of which 3 are from the same team and the rest are solo performers have to perform in a sequence. Find the number of sequences in whic...
- A group consists of 9 boys and 8 girls. In how many ways can 3 boys and 5 girls be selected from the group?
In how ways can the selection be made so that a particular member is always excluded?
...
