Assume that interest rate parity holds. The U.S. four-year interest rate is 5% annualized, and the Indian four-year interest rate is 8% annualized. Today’s spot rate of the Indian rupee is $.14. What is the approximate four-year forecast of the rupee’s spot rate if the four-year forward rate is used as a forecast?
A. $.174.
B. $.262.
C. $.125.
D. $.226.
E. $.115.
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