Question
PROBLEM 2 (20 POINTS): Assume the following information is available for Morocco and U.S Morocco US Nominal Interest Rate 5% 7% Expected Inflation 3% 6%
PROBLEM 2 (20 POINTS):
Assume the following information is available for Morocco and U.S
|
| Morocco | US |
| Nominal Interest Rate | 5% | 7% |
| Expected Inflation | 3% | 6% |
| Spot rate | 1 MAD= 0.10 USD | |
| 1 year forward rate | 1 MAD = 0.09 USD | |
- Does Interest rate parity hold?
- According to Purchasing Power Parity, what is the expected spot rate of USD in 1 year?
- According to International Fisher, what is the expected spot rate of the USD in 1 year?
- Reconcile your answers to question 1 and 3?
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Financial Management for Public, Health and Not-for-Profit Organizations
Authors: Steven A. Finkler, Daniel L. Smith, Thad D. Calabrese, Robert M. Purtell
5th edition
1506326846, 9781506326863, 1506326862, 978-1506326849
