Question 4:Consider two countries, Country X and Country Y. The nominal interestrate in Country X is 6% and in Country Y it is 4%. According to theInternational Fisher Effect, how should we expect the currency ofCountry X to behave relative to the currency of Country Y over the nextyear?Appreciate by 2%Depreciate by 2%O Remain the sameThe information provided is insufficient to determine the expectedbehavior of the currency.Question 5:If the current spot rate between Indian Rupee and Yuan is 9.77Rupee/Yuan. India's expected annual rate of inflation is equal to 3.28%per year, while the expected annual inflation rate for China is 1.6%. Whatis the expected spot rate in 10 years?Hint: 1. Which theory could help you forecast this rate?2. First compute the expected spot in 1 year then in 10 years to get half pointsminimum

International Fisher effect states that We can predict the changes in exchange rates between two…

Consider two countries, Country X and Country Y. The nominal interest rate in Country X is 6% and in Country Y it is 4%. According to the International Fisher Effect, how should we expect the currency of Country X to behave relative to the currency of Country Y over the next year?

Consider two countries, Country X and Country Y. The nominal interest rate in Country X is 6% and in Country Y it is 4%. According to the International Fisher Effect, how should we expect the currency of Country X to behave relative to the currency of Country Y over the next year?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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