Question
a) The current rate 1 Mexican peso = 0.069 Canadian dollar.New Inflation rate in Canada is 2.12% and the inflation rate in Mexico is 4.37%.According
a) The current rate 1 Mexican peso = 0.069 Canadian dollar.New Inflation rate in Canada is 2.12% and the inflation rate in Mexico is 4.37%.According to the Purchasing Power Parity (PPP) theory what will be the new exchange rate?
(b). The current exchange rate for 1 USD is 0.7491 Canadian Dollar. Assume the interest rate on one-year bank deposit in Canada moves to 4% and interest rate on 1 year bank deposit in USA reaches 7%. If International Fisher Effect (IFE) holds good, what will be the new exchange rate?
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Intermediate Financial Management
Authors: Brigham, Daves
10th Edition
978-1439051764, 1111783659, 9780324594690, 1439051763, 9781111783655, 324594690, 978-1111021573
