David is considering using a forward contract to hedge the
anticipated receivables in pounds next month. His local bank quoted
him a spot rate of 1.45 euros and a one-month forward rate of
1.4435 euros. Before David decides to sell pounds one month
forward, he wants to be sure that the forward rate is reasonable,
given the spot rate. A one-month Treasury security in Ireland
currently offers a yield of 1%, while a one-month Treasury security
in the UK offers a yield of 1.4%. Do you believe that the one-month
forward rate is reasonable given the spot rate of 1.45 euros
anticipated receivables in pounds next month. His local bank quoted
him a spot rate of 1.45 euros and a one-month forward rate of
1.4435 euros. Before David decides to sell pounds one month
forward, he wants to be sure that the forward rate is reasonable,
given the spot rate. A one-month Treasury security in Ireland
currently offers a yield of 1%, while a one-month Treasury security
in the UK offers a yield of 1.4%. Do you believe that the one-month
forward rate is reasonable given the spot rate of 1.45 euros
