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In the recent past the following spot exchange rates were recorded at New York: Country Currency per US dollar Turkey lira 5 India rupee 20

In the recent past the following spot exchange rates were recorded at

New York:

Country Currency per US dollar

Turkey lira 5

India rupee 20

Brazil (real) 200

  1. What is a cross exchange rate and what assumptions are made in its calculation? Find the implied spot exchange rate for the India rupee for one Turkey lira.

  2. Find the implied spot exchange rate for the Brazilian real against one Indian rupee.

  3. Also, suppose that the annual US rate of interest is 4% and the Indian annual rate of interest is 8%. Find the annual forward rate of Indian rupees US dollar.

  4. Again, suppose the annual US rate of interest is 4% and that the annual Forward exchange rate of the Brazilian real to the US dollar is 220. Find the implied annual rate of interest for Brazil.

  5. What is the interest rate differential between Brazil and the US?

  6. Use two different methods to determine the implied annual rate of depreciation of the Brazilian real versus the US dollar?

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