Q 6. An Investor has €20000 and faces an interest of 5% in the Euro Zone or he could his Euro for pound sterling at the spot exchange rate and invest in UK market which gives interest of 15% The following are currency exchange rates £1.00=$1.50 and €1.00==$1.20 which makes the spot cross rate €1.25=£1.00 Find out a) the IRP forward rate of £ vs € and b) how much he will earn extra if invested in UK market?

Q 6. An Investor has €20000 and faces an interest of 5% in the Euro Zone or he could his Euro for pound sterling at the spot exchange rate and invest in UK market which gives interest of 15% The following are currency exchange rates £1.00=$1.50 and €1.00==$1.20 which makes the spot cross rate €1.25=£1.00 Find out a) the IRP forward rate of £ vs € and b) how much he will earn extra if invested in UK market?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 7MC

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