Question

(premium) of your put opticui? 23. (1 point) If the S0​(KD/S)=0,302 and S0​(KDid)=0.395. What is Se (E/S)? 24. (1.5 points) If the interest rate in the U.K is 2% and the interest rate in Germany is 3% current S0​(f∈) is 0.86. According to Interest Rate Parity, what is F1​ (£) € )?

Answer 1

Apologies, but I couldn't quite understand your first question regarding "put opticui". As for your second question:

Interest Rate Parity (IRP) states that the difference in interest rates between two countries will determine the exchange rate between their currencies. Specifically, if the interest rate in one country is higher than the other, the currency of the country with the higher interest rate will depreciate relative to the currency with the lower interest rate.

Given the current spot exchange rate of S0​(f∈) = 0.86, the interest rate in the UK of 2%, and the interest rate in Germany of 3%, we can use the following formula to calculate the forward exchange rate (F1​ (£/€)):

F1​ (£/€) = S0​(f∈) x (1 + id) / (1 + if)

where id is the interest rate in Germany and if is the interest rate in the UK. Plugging in the given values, we get:

F1​ (£/€) = 0.86 x (1 + 0.03) / (1 + 0.02) = 0.8776

Therefore, according to Interest Rate Parity, the forward exchange rate of F1​ (£/€) is 0.8776.

Step-by-step explanation: