Consider the following: USD CNY (US dollar) (Chinese Yuan) Inflation (annual rate) 3% 7% One-year interest rate Spot exchange rate (USD:CNY) 4% ?% 6.00 Expected exchange rate (in one year) (USD:CNY) ?% One-year forward exchange rate (USD:CNY) ?% Required: Based on the linear approximation of international parity relations, calculate the missing figures indicated with the question marks.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 1
a) Consider the following:
USD
CNY
(US dollar)
(Chinese Yuan)
Inflation (annual rate)
3%
7%
One-year interest rate
4%
?%
Spot exchange rate (USD:CNY)
6.00
Expected exchange rate (in one year) (USD:CNY)
One-year forward exchange rate (USD:CNY)
?%
?%
Required:
Based on the linear approximation of international parity relations, calculate the missing
figures indicated with the question marks.
Transcribed Image Text:Question 1 a) Consider the following: USD CNY (US dollar) (Chinese Yuan) Inflation (annual rate) 3% 7% One-year interest rate 4% ?% Spot exchange rate (USD:CNY) 6.00 Expected exchange rate (in one year) (USD:CNY) One-year forward exchange rate (USD:CNY) ?% ?% Required: Based on the linear approximation of international parity relations, calculate the missing figures indicated with the question marks.
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