forward rate

This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.

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December 3, 2014 at 3:37 pm #216885
sonia
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spot rate us against the uk is 1.8420
inerst us is 5% uk is 4%
what would you expected 3 month forward rate /
December 3, 2014 at 4:11 pm #216915
John Moffat
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The three month US rate is 5% x 3/12 = 1.25%; the 3 month UK rate is 4% x 3/12 = 1%

Using the interest rate parity formula gives a 3 month forward rate os 1.8466
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