16 Forward rate forecast. Assume that you obtain a quote for a one-year forward rate on the...

Question:

16 Forward rate forecast. Assume that you obtain a quote for a one-year forward rate on the Mexican peso. Assume that Mexico’s one-year interest rate is 40%, while the UK one-year interest rate is 7%. Over the next year, the peso depreciates by 12%. Do you think the forward rate overestimated the spot rate one year ahead in this case? Explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Exploring Economics

ISBN: 9780324395464

4th Edition

Authors: Robert L. Sexton

Question Posted: