Suppose that the one-year forward price of euros

Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro. Further, assume that the spot exchange rate is $1.05 per euro, and the interest rate on dollar deposits is 10 percent and on euros it is 4 percent. Under these assumptions,

A.covered interest parity does hold

B.covered interest parity does not hold

C.It is hard to tell whether covered interest parity does or does not hold

D.Not enough information is given to answer the question.

E.None of the above

Answer: B