Suppose that the interest rates in the U. and Germany are equal to 5%, that the forward (one year) value of the is F$/ = 1$/ and that the spot…
Suppose that the interest rates in the U.S. and Germany are equal to 5%, that the forward (one year) value of the € is F$/€ = 1$/€ and that the spot exchange rate is E$/€ = 0.75$/€.
Does the covered interest parity condition hold
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