Question
1. Suppose that today's spot rate between the dollar and the British pound is $180/ . The annualized risk-free rates in the U.S. and the
1.Suppose that today's spot rate between the dollar and the British pound is $180/. The annualized risk-free rates in the U.S. and the U.K. are 2.5% and 3.75%, respectively. The annualized inflation rates in the U.S. and the U.K are 3.5% and 4.75%, respectively.
a.Estimate the spot rate in 7 years according to IRP.
b.Estimate the spot rate in 7 years according to PPP.
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Management Science The Art Of Modeling With Spreadsheets
Authors: Stephen G. Powell, Kenneth R. Baker
3rd Edition
0470530677, 978-0470530672
