The United States
Dollar is selling in India at Rs. 45.50. If the interest rate for a 6-months
borrowing in India is 8% per annum and the corresponding rate in USA is 2%.
(i) do you expect
United States Dollar to be at a premium or at discount in the Indian forward
market;
(ii) what is the
expected 6-months forward rate for United States Dollar in India; and
(iii)
what is the rate of forward premium or discount?
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