Question
Economics Question on Money Market
Suppose the US interest rate is 3% per annum. The ₹-$ exchange rate in spot market is 80 and in 3-month forward market is 81. What is the per annum return on US bond in rupee terms?
A
4.25%
B
8%
C
1.75%
D
-2%
Answer
8%
Explanation
Solution
The correct option is(B): 8%