The current spot rate for the US$ against the pound is 1,8420
Interest in the us is 5% pa whereas it is 4% pa in the uk
What would you expect he 3month forward rate to be
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Forward rate
11y ago#13 month interest in US is 5 x 3/12 = 1.25%
3 month interest in UK is 4 x 3/12 = 1%
So using interest rate parity formula, 3 month forward rate = 1.8420 x (1.0125/1.01) = 1.8466
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