chapter 23, practise question 2

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February 7, 2017 at 5:06 pm #371501
aamir2111
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Dear John,

If the question has given a spot rate, interest rates and inflation rates (for both countries), then in order to determine the forward rate do I use the inflation rates or the interest rates?
February 7, 2017 at 5:40 pm #371512
John Moffat
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The forward rate is always determined by the interest rates (using the Fo formula on the formula sheet). It is exactly the same as money market hedging, and must be 🙂
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