Question
Suppose that the interest rate on dollar accounts is equal to 2% ( i $ = 0.02), the interest rate on Polish zloty accounts is
Suppose that the interest rate on dollar accounts is equal to 2% (i$ = 0.02), the interest rate on Polish zloty accounts is equal to 4.5% (iz? = 0.045), and the expected exchange rate between the dollar and the zloty one year from now is ee = 4 z?/$. Assume that the (uncovered) interest parity holds.
Find the spot exchange rate, e. (Answer in z?/$ and round to the nearest tenth.)
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Fixed Income Securities Valuation Risk and Risk Management
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0470109106, 978-0470109106
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