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Hi Sir
I need your your help regarding a question from june 2008 paper Asteroid systems.Part a of the question requires us to calculate the lowest interest rate maturing in 2 months. Using the interest rate parity formula how was the spot rate of 1.6244 calculated?
Your help is really appreciated
The closing mid-point from the question is 1.6242. However the bid/offer spread of 239-244 means that the actual rates (depending on whether buying or selling) are 1.6239 – 1.6244.
I would not worry about this – the question was set by the previous examiner who was replaced because some of his questions were a bit ridiculous. The current examiner does not express exchange rates as they are expressed in this question.
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