Question
As of today, the spot exchange rate is 1.00 = $1.1325 and the rates of inflation expected to prevail for the next year is 2%
As of today, the spot exchange rate is 1.00 = $1.1325 and the rates of inflation expected to prevail for the next year is 2% in the U.S. and 1.65% in the euro zone.
- What is the one-year forward rate that should prevail to preclude arbitrage opportunity?
B. If the real interest rate in the Euro zone is 0.55%, what would you expect the nominal interest rate to be in the Euro zone?
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Introductory Econometrics For Finance
Authors: Chris Brooks
3rd Edition
1107661455, 9781107661455
