how to forecast spot exchange rate for one year
8. Suppose that the current spot exchange rate is â¬1.50/â¤ and the one-year forward exchange rate is â¬1.60/â¤. The one-year interest rate is 5.4% in euros and 5.2% in pounds. You can borrow at most â¬1,000,000 or the equivalent pound amount, i.e., â¤666,667, at the current spot exchange rate.a. Show how you can realize a guaranteed profit from covered interest arbitrage.ou should definitely choose to use âoption aâ, and save $1,266, which is the difference between $49,755 and $48489. 3. Currently, the spot exchange rate is $1.50/Â£ and the three-month forward exchange rate is $1.52/Â£.