Suppose the spot and six-month forward rates on the Norwegian krone are NKr 9.14 and NKr 9.27, respectively. The annual risk-free rate in the United States is 3.8 percent, and the annual risk-free rate in Norway is 5.7 percent. What must the six-month forward rate be to prevent arbitrage? Note: Do not include the Norwegian krone sign (NKr). Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Forward rate NKr 12.1300

Essentials Of Investments
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Suppose the spot and six-month forward rates on the Norwegian krone are NKr 9.14 and NKr 9.27, respectively. The annual risk-free
rate in the United States is 3.8 percent, and the annual risk-free rate in Norway is 5.7 percent. What must the six-month forward rate be
to prevent arbitrage?
Note: Do not include the Norwegian krone sign (NKr). Do not round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.
Forward rate
NKr
12.1300
Transcribed Image Text:Suppose the spot and six-month forward rates on the Norwegian krone are NKr 9.14 and NKr 9.27, respectively. The annual risk-free rate in the United States is 3.8 percent, and the annual risk-free rate in Norway is 5.7 percent. What must the six-month forward rate be to prevent arbitrage? Note: Do not include the Norwegian krone sign (NKr). Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Forward rate NKr 12.1300
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