ppose the spot rate is A$1.77/GBP. An Audi can be purchased in Sydney, Australia, for A$30,00 in London, United Kingdom, for £17,860. The real interest rate is 3.5% p.a. for AUD and 1.5% P alculate the real exchange rate of Sydney Audi per London Audi Is the real exchange rate istent with the prediction of the absolute PPP? Explain ppose the real interest parity holds, calculate the expected real exchange rate of ondon Audi. Will the change in the real exchange rate lead to an increase in the alia? Explain. YAL port View Insert Format Tools Table
ppose the spot rate is A$1.77/GBP. An Audi can be purchased in Sydney, Australia, for A$30,00 in London, United Kingdom, for £17,860. The real interest rate is 3.5% p.a. for AUD and 1.5% P alculate the real exchange rate of Sydney Audi per London Audi Is the real exchange rate istent with the prediction of the absolute PPP? Explain ppose the real interest parity holds, calculate the expected real exchange rate of ondon Audi. Will the change in the real exchange rate lead to an increase in the alia? Explain. YAL port View Insert Format Tools Table
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 24
Suppose the spot rate is A$1.77/GBP. An Audi can be purchased in Sydney, Australia, for A$30,000
or in London, United Kingdom, for £17,860. The real interest rate is 3.5% p.a. for AUD and 1.5% for
GBP,
a) Calculate the real exchange rate of Sydney Audi per London Audi Is the real exchange rate
consistent with the prediction of the absolute PPP? Explain
b) Suppose the real interest parity holds, calculate the expected real exchange rate of
per London Audi. Will the change in the real exchange rate lead to an increase in the
Australia? Explain.
y Audi
ports of
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12pt Paragraph
BIU AV2v T²V 2
120
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