As of March 18, 2009, the exchange rate between the Turkish Lira and U.S. dollar is YTL1.70/$. The consensus forecast for the U.S. and Turkey inflation rates for the next 1-year period is 1.3% and 8.5%, respectively. How would you forecast the exchange rate to be at around March 18, 2010? What is the expected rate of change in exchange rate?   Using the approximation formula Using the exact formula

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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  1. As of March 18, 2009, the exchange rate between the Turkish Lira and U.S. dollar is YTL1.70/$. The consensus forecast for the U.S. and Turkey inflation rates for the next 1-year period is 1.3% and 8.5%, respectively. How would you forecast the exchange rate to be at around March 18, 2010? What is the expected rate of change in exchange rate?

 

  1. Using the approximation formula
  2. Using the exact formula

 

2.  If the nine-month forward rate F9(Y/$) = 82, and the inflation rate in the      U.S. and Japan are 1.6% and -0.8% respectively, what should be S(Y/$)?

 

3.  If the 3-month CD rate is 1.2% (annual) in Thailand and if the expected        annual inflation is 5.7%, what is the real annual interest rate?

 

 

4.  If the International Fisher Effect holds, and if the following information        is given, what should be S(MYD/SGD)?

The expected inflation in Malaysia is 4%

The expected inflation in Singapore is 3%

F(SGD/MYD) is 0.3

SGD is Singapore dollar and MYD is Malaysian Ringgit

 

 

 

 

 

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