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 answer this question
Homework Answers
The correct answer is option b. depreciation of the Canadian dollar's value over the next year
If the international Fisher effect holds good, then a country with a higher interest rate is expected to have its currency depreciate over the next year. The loss in the exchange rate is compensated by the higher interest rate.
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US interest rates are 3 percent, while Canadian interest rates
are 4 percent. If the international...
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.
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The following table shows the US$/C$ spot rate and forward rates as of January 11, 2019....
The following table shows the US$/C$ spot rate and forward rates
as of January 11, 2019.
(a)
Covert the above exchange rates into the direct quotes.
(b)
Does the forward rate structure imply that the Canadian dollar
will depreciate or appreciate against the US dollar over the
next
year?
c)What is the implied annual rate of appreciation/depreciation
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The following table shows the US$/C$ spot rate and forward rates
as of January 11, 2019.
(a)
Covert the above exchange rates into the direct quotes.
(b)
Does the forward rate structure imply that the Canadian dollar
will depreciate or appreciate against the US dollar over the
next
year?
c)What is the implied annual rate of appreciation/depreciation
of the Canadian dollar against the US dollar over the next
three months, over the next six months, and over the next
year?...
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