ZuoTi.Pro
Question

All interest and inflation rates are stated as annual rates. International Fisher effect 4. If the...

All interest and inflation rates are stated as annual rates.

International Fisher effect

4. If the spot market exchange rate for the Haitian gourde is 783.961, the 1-year interest rate paid on Haitian government debt is 20.0%, and the 1-year interest rate on US government debt is 2.60%, what is the expected exchange rate for the gourde in one year?

5. If the spot market exchange rate for the Australian dollar is 0.7166, the 3-month interest rate on Australian government debt is 1.50%, and the 3-month interest rate on US Treasury debt is 2.39%, what is the expected exchange rate for the Australian dollar in three months?

6. If the spot market exchange rate for the Morocco dirham is 9.5356, the 3-year interest rate in Morocco is 2.25%, and the 3-year interest rate in the US is 2.58%, what is the expected exchange rate for the Tanzanian shilling in 3 years?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Spot rate 1 HG 783.961 Interestrate Period US 2.60% year 20.00% Expected exchangr rate 1HG- 6702867 10 2) Spot rate 1 AUD - 0.7166 12 13 AUD 1.50% 0.25 US 2.39% Interestrate 15 16 17 18 3) 19 20 21 Period Expected exchangr rate 1 AUD Spot rate - 1 MD 9.5356 Interestrate Period MD 2.25% US 2.58% year 23 24 25 Expected exchangr rate 1 MD-Spot rate 1 HG 783.961 US 0.2 0.026 Interestrate Period year Expected exchangr rate 1 HG 10 2) Spot rate 1 AUD 0.7166 12 13 14 15 16 17 18 3) 19 20 21 AUD US Interestrate 0.015 0.0239 Period Expected exchangr rate Spot rate 1 AUD -E10 (1+D13)/(1+C13) C14 1 MD 9.5356 MD US 0.0225 Interestrate Period 0.0258 year 23 24 25 Expected exchangr rate 1 MD -E18((1+D21)/(1+C21)y C22

0 0
Add a comment
Know the answer?
Add Answer to:
All interest and inflation rates are stated as annual rates. International Fisher effect 4. If the...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • All interest and inflation rates are stated as annual rates. Unbiased forward rate (forward expectation parity)...

    All interest and inflation rates are stated as annual rates. Unbiased forward rate (forward expectation parity) 1. If the spot market exchange rate for the euro is 1.1427 and the 6-month forward quote is 178, what is the expected exchange rate for the euro in six months? 2. If the spot market exchange rate for the Hong Kong dollar is 7.8461 and the 1-year forward quote is -616, what is the expected exchange rate for the Hong Kong dollar in...

  • All interest and inflation rates are stated as annual rates. Purchasing power parity 1. If the...

    All interest and inflation rates are stated as annual rates. Purchasing power parity 1. If the spot market exchange rate for the British pound is 1.3158, the expected inflation rate for the UK is 2.10%, and the expected inflation rate for the US for the next year is 1.90%, what is the expected exchange rate for the British pound in one year? 2. If the spot market exchange rate for the Philippine peso is 52.55, the expected inflation rate for...

  • Assume that U.S. interest rates are 6%, while British interest rates are 79. If the international...

    Assume that U.S. interest rates are 6%, while British interest rates are 79. If the international Fisher effect holds and is used to determine the future spot rate, the forecast would reflect an expectation of: appreciation of US dollar value over the next year. depreciation of pound's value over the next year. no change in pound's value over the next year, not enough information to answer this question, A and B are both correct.

  • US interest rates are 3 percent, while Canadian interest rates are 4 percent. If the international...

    US interest rates are 3 percent, while Canadian interest rates are 4 percent. If the international Fisher effect holds and is used to determine the future spot rate, the forecast would reflect an expectation of:​ a. appreciation of the Canadian dollar's value over the next year ​b. depreciation of the Canadian dollar's value over the next year ​c. no change in the Canadian dollar's value over the next year d. none of the options listed ​e. not enough information to...

  • 2. Interest rates are currently 2% in the US and 3% in Germany. The current spot...

    2. Interest rates are currently 2% in the US and 3% in Germany. The current spot rate between the € and $ is $1.5/€. What is the expected spot rate in one year if the international Fisher effect holds? (Answer:1.4854$/€)

  • 5. What are the implications of the Fisher Effect? (a) In the long run, nominal interest...

    5. What are the implications of the Fisher Effect? (a) In the long run, nominal interest rates are only determined by inflation rates. b) Domestic policy cannot affect the real interest rate. (c) There is only one unique real interest rate in the world. (d) All of the above 6. In 2009, U.S. liabilities were dollar-denominated corporate and official debt for the most while U.S. external assets were mostly equities, bank loans, government debt, and foreign direct investment, denominated in...

  • Arbitrage Rule of Thumb: If the difference in interest rates is greater than the forward premium/discount,...

    Arbitrage Rule of Thumb: If the difference in interest rates is greater than the forward premium/discount, or expected change in the spot rate for UIA, invest in the higher interest yielding currency. If the difference in interest rates is less than the forward premium (or expected change in the spot rate), invest in the lower yielding currency. John Duell, a foreign exchange trader at JPMorgan Chase, can invest $8 million, or the foreign currency equivalent of the bank's short term...

  • Suppose the spot exchange rate be $1.45 per euro, the interest rate on one-year euro-denominated German...

    Suppose the spot exchange rate be $1.45 per euro, the interest rate on one-year euro-denominated German government bond is 2%, and the expected future spot rate be $1.50 per euro. At the same time, the interest rate on dollar-denominated US government bond with the same maturity is 3%. a. Calculate the expected dollar return on the German government bond. b. Does your answer in Part (a) imply free capital mobility between the US and Germany? Explain your reasoning. c. Suppose...

  • 5A. Suppose the current spot rate for the UK pound is $1.9586/£. The annual inflation rates...

    5A. Suppose the current spot rate for the UK pound is $1.9586/£. The annual inflation rates in the US and in the UK are expected to be 2% and 5%, respectively. This means that: a. The U.S. dollar should appreciate over the next year. b. The U.S. dollar should depreciate over the next year. c. Both a and b are true. d. Neither a nor b are true. 5B. Using the information provided in question 5A, what is your best...

  • Mexican interest rates are normally substantially higher than U.S. interest rates. a. Assuming that interest rate...

    Mexican interest rates are normally substantially higher than U.S. interest rates. a. Assuming that interest rate parity exists, do you think hedging with a forward rate would be beneficial if the spot rate of the Mexican peso was expected to decline slightly over time? b. Would hedging with a money market hedge be beneficial if the spot rate of the Mexican peso was expected to decline slightly over time (assume zero transaction costs)? Explain. c. What are some limitations on...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT