Question
Consider the following information about the U.S. and Brazil: U.S. Brazil Expected inflation rate 2% 4% Nominal interest rate 3.1% 4.4% Spot rate $0.23 per
Consider the following information about the U.S. and Brazil:
| U.S. | Brazil | |
| Expected inflation rate | 2% | 4% |
| Nominal interest rate | 3.1% | 4.4% |
| Spot rate | $0.23 per real | |
| 1-year forward rate | $0.213 per real |
What is the expected exchange rate in one year according to purchasing power parity (in dollars per real)?
What is the expected exchange rate in one year according to the international Fisher effect (in dollars per real)?
What should be the one-year forward rate according to interest rate parity (in dollars per real)?
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Investing All In One For Dummies
Authors: Eric Tyson
2nd Edition
1119873037, 978-1119873037
