Suppose the 30 day interest rate in the USA is 1.2% per month and in Great...
Suppose the 30 day interest rate in the USA is 1.2% per month and in Great Britain is .5%. By how much would you expect the value of the US dollar relative to the pound to change over the next 30 days?
Homework Answers
According to the interest rate parity condition
(Exchange in $/£)
Expected Future Rate = spot rate *(1+ Interest in US)/(1+interest in Britain)
because the interest rate in United States is more than that of Britain the expected future rate in terms of $/£ increases as a result of which we can understand the dollar depreciates against the pound
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Suppose the 30 day interest rate in the USA is 1.2% per month
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