changes in the forward rate assume that interest rate parity exists and will continu 1554797

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 of the euro increased and is now higher than the U.S. 1-month interest rate. The 1-month interest rate in the United States remained unchanged.

a. Based on the information, do you think the 1-month forward rate of the euro exhibited a discount or premium this morning?

 b. How did the forward premium change this afternoon?