In the recent past the followingspotexchange rates were recorded at New York: Country: Currency per US dollar
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Question:
In the recent past the followingspotexchange rates were recorded at
New York:
Country: Currency per US dollar
Turkey lira 5
India rupee 20
Brazil (real) 200
- What is a cross exchange rate and what assumptions are made in its calculation? Find the implied spot exchange rate for the India rupee for one Turkey lira.
- Find the implied spot exchange rate for the Brazilian real against one Indian rupee.
- Also, suppose that the annual US rate of interest is 4% and the Indian annual rate of interest is 8%. Find the annual forward rate of Indian rupees - US dollar.
- Again, suppose the annual US rate of interest is 4% and that the annual Forward exchange rate of the Brazilian real to the US dollar is 220. Find the implied annual rate of interest for Brazil.
- What is the interest rate differential between Brazil and the US?
- Use two different methods to determine the implied annual rate of depreciation of the Brazilian real versus the US dollar?
Expert Answer:
A cross exchange rate is the exchange rate between two currencies calculated indirectly using the exchange rates of each currency against a third curr... View the full answer
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