Suppose the spot rate on the Indian rupee is Rs65.2203, the risk-free nominal rate in the U.S. is 4.6 percent, and the Indian risk-free nominal rate is 6.2 percent. Which one of the following one-year forward rates best establishes the approximate interest rate parity condition?
A) Rs64.1768
B) Rs66.2638
C) Rs62.8840
D) Rs63.0733
E) Rs67.8420
B) Rs66.2638
Explanation: ƒ1 ? Rs65.2203[1 + (.062 ? .046)]1
ƒ1 ? Rs66.2638
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