The 90-day interest rates (annualized) in the U.S. and Japan are, respectively, 10% and 7%, while the direct spot quote for the yen in New York is $.004300. At what 90-day forward rate would interest rate parity hold? b) If the U.S. inflation rate is expected to be 5 percent over the next year, while the German inflation rate is expected to be 3 percent. The current spot rate of the euro is $1.03. Using purchasing power parity, what is the expected spot rate at the end of one year? steps in excel please
The 90-day interest rates (annualized) in the U.S. and Japan are, respectively, 10% and 7%, while the direct spot quote for the yen in New York is $.004300. At what 90-day forward rate would interest rate parity hold? b) If the U.S. inflation rate is expected to be 5 percent over the next year, while the German inflation rate is expected to be 3 percent. The current spot rate of the euro is $1.03. Using purchasing power parity, what is the expected spot rate at the end of one year? steps in excel please
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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a) The 90-day interest rates (annualized) in the U.S. and Japan are, respectively, 10% and 7%, while the direct spot quote for the yen in New York is $.004300. At what 90-day forward rate would interest rate parity hold? b) If the U.S. inflation rate is expected to be 5 percent over the next year, while the German inflation rate is expected to be 3 percent. The current spot rate of the euro is $1.03. Using purchasing power parity, what is the expected spot rate at the end of one year? steps in excel please
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