. If the interest rate in Country G is greater than the interest rate in Country H, the numerator is greater than the denominator on the right side of the equation. The left side must have the same relationship, so the forward rate must be greater than the spot rate.
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Country G and Country H have currencies that trade freely and have markets for forward currency contracts. If Country G has an interest rate greater than that of Country H, the no-arbitrage forward G/H exchange rate is: A. equal to the G/H spot rate. B. less than the G/H spot rate. C. greater than the G/H spot rate. |