International Macroeconomics problem
5. Spot and forward exchange rates DOLLAR EURO POUND Closing Day's Closing Day's Closing Day's Sep 29 Currency Mid Change Mid Change Mid Change .Three Month 0.7789 0.0001 0.9135 0.0068 .One Year 0.7791 0.0001 0.9130 0.0068 United States United States Dollar 1.1731 0.0086 1.2840 -0.0001 . One Month 1.1730 -0.1110 1.2841 -0.0001 . Three Month 1.1728 0.1111 1.2841 -0.0001 . One Year 1.1721 -0.1110 1.2843 -0.0001 Venezuela Venezuelan Bolivar Fuerte Vietnam Vietnamese Dong 23191.0000 2.0000 27205.4803 201.9536 29778.3006 0.2660 European Union Euro 0.8524 0.0063 1.0946 -0.0082 . One Month 0.8524 0.0063 1.0945 -0.0082 .Three Month 0.8522 -0.0063 1.0944 -0.0082 . One Year 0.8515 -0.0063 1.0940 -0.0082 DOLLAR EURO POUND Closing Day's Closing Day's Closing Day's Oct 30 Currency Mid Change Mid Change Mid Change .Three Month 0.7735 -0.0024 0.9008 -0.0035 .One Year 0.7737 -0.0024 0.9003 0.0035 United States United States Dollar 1.1648 -0.0009 1.2930 0.0040 One Month 1.1648 0.1241 1.2930 0.0040 .Three Month 1.1646 -0.1241 1.2931 0.0040 .One Year 1.1639 -0.1241 1.2933 0.0040 Venezuela Venezuelan Bolivar Fuerte Vietnam Vietnamese Dong 23182.5000 2.0000 27004.1829 -18.3890 29974.8511 95.2956 European Union Euro 0.8585 0.0007 1.1100 0.0043 .One Month 0.8584 0.0007 1.1100 0.0043 .Three Month 0.8582 0.0007 1.1099 0.0043 .One Year 0.8575 0.0007 1.1094 0.0043Use the data to answer the following questions. Find the forward exchange rate on Sept 29 (1 mouth) between the $ and the British Pound and the forward exchange rate (1 month) between the dollar and the euro in the table as well as the spot exchange rates (closing mid point). a. Report below: Spot $I = 1-month forward $l= Are the markets expecting the Pound to depreciate or to appreciate with respect to the dollar? (underline the correct answer) b. Report below: Spot $l = 1-month days forward $I= Are the markets expecting the Euro to depreciate or to appreciate with respect to the dollar? (underline the correct answer) c. Now check the exchange rates on Oct 30, 2020 (spot), what is the $I and the $l . Do you think that the forward rate was a good predictor of the direction of the change between Sept 29 and Oct 2020'? for the British Pound? YES NO for the EURO? YES NO