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MC Question 1
The home currency of ACB Co is the dollar ($) and it trades with a company in a foreign country whose home currency is the Dinar. The following information is available:
| Home country | Foreign country | |
|---|---|---|
| Spot rate | 20·00 Dinar per $ | |
| Interest rate | 3% per year | 7% per year |
| Inflation rate | 2% per year | 5% per year |
What is the six-month forward exchange rate?
A. 20·39 Dinar per $
B. 20·30 Dinar per $
C. 20·59 Dinar per $
D. 20·78 Dinar per $