As per interest rate parity, Expected Spot rate = Current Spot rate * ((1+p)/(1+b)) Where, = 1.1*((1+0.02)/(1+0.01)) p = Interest rate of quote currency = 2% = 1.11 b = Interest rate of base currency = 1% $/€=1.1 means one euro is exchanged for 1.1 dollar. Thus, expected spot rate in 30 days is E$/€=1.11 Solution As per interest rate parity, Expected Spot rate = Current Spot rate * ((1+p)/(1+b)) Where, = 1.1*((1+0.02)/(1+0.01)) p = Interest rate of quote currency = 2% = 1.11 b = Interest rate of base currency = 1% $/€=1.1 means one euro is exchanged for 1.1 dollar. Thus, expected spot rate in 30 days is E$/€=1.11.