Question
Suppose that in Japan the interest rate is 8% and inflation is expected to be 3%. Meanwhile, the expected inflation rate in France is 12%,
Suppose that in Japan the interest rate is 8% and inflation is expected to be 3%. Meanwhile, the expected inflation rate in France is 12%, and the English interest rate is 14%. To the nearest whole number, what is the best estimate of the oneyear forward exchange premium (discount) at which the pound will be selling relative to the French franc?
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown, Sanford J. Leeds
11th Edition
1305262999, 1305262997, 035726164X, 978-1305262997
