T Khan is a U.S.-based investor. Mr. Khan does not believe that the international Fisher effect (IFE) holds. Current one-year interest rates in Singapore are 12 percent, while one-year interest rates in the United States are 8 percent. Khan converts $800,000 to Singapore dollars and invests them in Singapore money market security. One year later, he converts the Singapore dollars back to U.S. dollars. The current spot rate of the Singapore dollar is $.7220. According to the IFE, what should the spot rate of the Singapore dollar in one-year be?
T Khan is a U.S.-based investor. Mr. Khan does not believe that the international Fisher effect (IFE) holds. Current one-year interest rates in Singapore are 12 percent, while one-year interest rates in the United States are 8 percent. Khan converts $800,000 to Singapore dollars and invests them in Singapore money market security. One year later, he converts the Singapore dollars back to U.S. dollars. The current spot rate of the Singapore dollar is $.7220. According to the IFE, what should the spot rate of the Singapore dollar in one-year be?
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
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T Khan is a U.S.-based investor. Mr. Khan does not believe that the international Fisher effect (IFE) holds. Current one-year interest rates in Singapore are 12 percent, while one-year interest rates in the United States are 8 percent. Khan converts $800,000 to Singapore dollars and invests them in Singapore
According to the IFE, what should the spot rate of the Singapore dollar in one-year be?
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