Page 495 - Microsoft Word - 00 ACCA F9 IWB prelims 2017.docx

Business valuations and market efficiency

Question 7

IRPT

The current exchange rate between Euros and US$ is €0.93 = $1.

If interest in the Eurozone is anticipated to be 5% over the next year and in the
US will be 6%, calculate the forward rate for delivery in a year’s time.

F0 = 0.93 × 1.05/1.06 = €0.921 = $1

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