Question
a) Using the precise form of the international parity relations and the information below, compute: (i) the one-year interest rate in the United Kingdom (ii)
a) Using the precise form of the international parity relations and the information below, compute: (i) the one-year interest rate in the United Kingdom (ii) the expected exchange rate (GBP:CNY) (iii) the one-year forward exchange rate (GBP:CNY). Provide all your workings and full calculations, when answering this question.
United Kingdom GBP China CNY Expected inflation (annual rate) 5% and 8% respectively
One-year interest rate ? 14% for CNY
Spot exchange rate (GBP:CNY) 8.6000 for china
Expected exchange rate (in one year) (GBP:CNY) ? (need to find)
One-year forward exchange rate (GBP:CNY) ? (need to find)
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