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b. The annual inflation rate in the US is expected to be 6 %, while it is expected to be 2.5% i in Australia. The
b. The annual inflation rate in the US is expected to be 6 %, while it is expected to be 2.5% i in Australia. The cuitent spot rate (on 10/07/18) for the Australian Dollar (AD) is $0.85 Required According to Purchasing Power Parity, estinate the expected percentage change in the value of theAD during a one-year period and calculate its (AD) expected valueas at 10/07/19. (10marks) Vii. Suppose the value of the AD turned out to bc $0.865 on 10/07/1.8, what is the real exchange? Whicl currency has experienced gain (how much), and which a loss (how inuch), in realpurchasing power during the period? (10marks) 9! If the real rate of interest is expected to be 3% both in US and Australia, use the Fisher model tocalculate the nominal rates of interest in USA and in Australia. (10marks) b. The annual inflation rate in the US is expected to be 6 %, while it is expected to be 2.5% i in Australia. The cuitent spot rate (on 10/07/18) for the Australian Dollar (AD) is $0.85 Required According to Purchasing Power Parity, estinate the expected percentage change in the value of theAD during a one-year period and calculate its (AD) expected valueas at 10/07/19. (10marks) Vii. Suppose the value of the AD turned out to bc $0.865 on 10/07/1.8, what is the real exchange? Whicl currency has experienced gain (how much), and which a loss (how inuch), in realpurchasing power during the period? (10marks) 9! If the real rate of interest is expected to be 3% both in US and Australia, use the Fisher model tocalculate the nominal rates of interest in USA and in Australia. (10marks)
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