33. Forecasting based on the IFE The prevailing one-year risk-free interest rate in Malaysia is higher than in Australia and will continue to be higher over time. Sycamore Co. believes the international Fisher effect (IFE) can be used to derive the best forecast of the ringgit’s exchange rate movement over time. However, you believe that the prevailing spot rate is the best forecast of the future spot rate. Based on your opinion, will Sycamore Co. typically overestimate the future spot rate, underestimate the future spot rate, or create an unbiased forecast (similar chance of overestimating or underestimating the future spot rate) of the Malaysian ringgit? Provide a good explanation
According to the International Fisher Effect the changes in the nominal interest rates between two countries will show the changes in the spot rate . There is an inverse relationship between the two. If a country is having a higher interest rate in comparison with the other country its currency will depreciate. This is because the higher interest rates are an indication of inflation .
Here, the interest rate in Malaysia is higher than in Australia. So, the Malaysian ringgit is expected to depreciate. We believe that prevailing spot rate is the best forecast of the future spot rate. This belief proves to be right when you combine international Fisher Effect with the interest rate parity theory. This gives the condition of unbiasedness which means that the exchange rate of the two currencies in the future indicates the future spot exchange rate.
So, Sycamore Co will create an unbiased forecast of the Malaysian ringgit
33. Forecasting based on the IFE The prevailing one-year risk-free interest rate in Malaysia is higher...
First, read the article on "The Delphi Method for Graduate Research." ------ Article is posted below Include each of the following in your answer (if applicable – explain in a paragraph) Research problem: what do you want to solve using Delphi? Sample: who will participate and why? (answer in 5 -10 sentences) Round one questionnaire: include 5 hypothetical questions you would like to ask Discuss: what are possible outcomes of the findings from your study? Hint: this is the conclusion....