Calculated forward rate is exactly the same as market, Financial Management

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Calculated forward rate is exactly the same as market

Assume the following information is available for the U.S. and Europe: U.S. Europe Nominal interest rate 4% 6% Expected inflation 2% 5% Spot rate ----- $1.13 One-year forward rate ----- $1.10 Does IRP hold assuming markets are perfectly efficient with no market friction? (meaning calculated forward rate is exactly the same as market forward rate) Yes No

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