Chapter 8 Problem 44 - Changes in the Forward Rate. Assume that interest rate parity exists and will continue to exist. As of this morning, the 1-month interest rate in the United States was higher than the 1-month interest rate in the Eurozone. Assume that as a result of the European Central Bank’s monetary policy this afternoon, the 1-month interest rate in the United States remained unchanged. Based on the information,
a. Do you think the 1-month forward rate of the euro exhibited a discount or premium this morning?
b. How did the forward premium changes this afternoon?