Mini Quiz

Question 1 of 5

Consider a situation in which the domestic one-year risk-free interest rate is 10%, the current spot exchange rate with a particular foreign currency is 1.00, and a one-year futures contract on the foreign currency has a price of 1.05 domestic units per unit of foreign currency. Assuming continuous compounding, which of the following rates is closest to the one-year risk-free interest rate in the foreign currency?

5.12%

10.24%

15.36%

20.48%