Forward rate calculation

label Business & Finance
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

You know the following. The interest rate in the $ is 10% and in the euro it is 6%.  If the ER is euro / $1 (meaning 1 euro for 1 dollar.)  

Use formula

$P (1 + i$) = $P (€/$ S) (1+ i)(1/ €/$ F) or

(i$ – i)/(1 + i) = (€/$S – €/$ F)/ €/$ F (Euro Terms) or

(i$ – i)/(1 + i) = ($/€ F – $/€ S )/ $/€S (Dollar Terms)

Jun 22nd, 2015

Thank you for the opportunity to help you with your question!

(i dollar-i euro)/(1+euro)=(dollar/euroF-dolar/euroS) (Euro terms).....................................................................

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jun 22nd, 2015

could you plug in the numbers for me.  I will do the math part


Thanks

Jun 22nd, 2015

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