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2 Exchange Rate Suppose the one-year forward price of the dollar is K49.5 (Slovakian koruna) whereas the spot exchange rate is K46.95. The riskless annual

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2 Exchange Rate Suppose the one-year forward price of the dollar is K49.5 (Slovakian koruna) whereas the spot exchange rate is K46.95. The riskless annual dollar rate of interest is 2.75%. If the expectations hypothesis holds, what is the dollar/koruna spot exchange rate expected to be in one year? Discuss several scenarios where the expectations hypothesis may not hold. What would be the impact on the expected dollar/koruna spot exchange rate? 2 Exchange Rate Suppose the one-year forward price of the dollar is K49.5 (Slovakian koruna) whereas the spot exchange rate is K46.95. The riskless annual dollar rate of interest is 2.75%. If the expectations hypothesis holds, what is the dollar/koruna spot exchange rate expected to be in one year? Discuss several scenarios where the expectations hypothesis may not hold. What would be the impact on the expected dollar/koruna spot exchange rate

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