Ask Question
20 January, 21:46

What is the forward premium on euros (the forward discount on USD) ? What is the difference between the interest rate on one-year USD deposits and that on one-year euro deposits (assuming no repayment risk) ?

+3
Answers (1)
  1. 21 January, 00:14
    0
    In calculating the Interest parity condition is given as R$ = R€ + (Ee$/€ - E$/€) / E$/€where R$and R€ are the current interest rates on one-year dollar and euro deposits respectively, E$/€ is the spot exchange rate, and Ee$/€ is the one-year forward exchange rate. The interest rate difference between one-year dollar deposits and one-year euro deposits will be know when there is a difference between the dollar and euro because the interest difference must be equal to the forward premium on euro against dollars when covered interest parity holds.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “What is the forward premium on euros (the forward discount on USD) ? What is the difference between the interest rate on one-year USD ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers