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MC Question 1

The home currency of ACB Co is the dollar ($) and it trades with a company in a foreign country whose home currency is the Dinar. The following information is available:

Home country Foreign country
Spot rate 20·00 Dinar per $
Interest rate 3% per year 7% per year
Inflation rate 2% per year 5% per year

What is the six-month forward exchange rate?

A. 20·39 Dinar per $
B. 20·30 Dinar per $
C. 20·59 Dinar per $
D. 20·78 Dinar per $