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Suppose the spot rate and the 1-year forward rates for the euro are 0.88/$ and 0.95/$ (i.e. 0.95 euros per dollar). (2 points) Is the
- Suppose the spot rate and the 1-year forward rates for the euro are €0.88/$ and €0.95/$ (i.e. 0.95 euros per dollar).
- (2 points) Is the euro expected to get stronger or weaker? Why?
- (3 points) What would you estimate is the difference between inflation rates in the US and Europe (i.e., inflation(US) – inflation(Europe))?
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
2nd edition
013299755X, 132162768, 9780132997553, 978-0132162760
