Question
Suppose, we are given the following information: Nominal Interest Rates in United States = 4% Nominal Interest Rates in Germany = 6% Current Exchange Rate:
Suppose, we are given the following information:
Nominal Interest Rates in United States = 4%
Nominal Interest Rates in Germany = 6%
Current Exchange Rate: 1 = $2
Which currency should appreciate and which currency should decline?
By how much foreign currency (euro) will change?
What will be the anticipated value of euro in one year given the nominal interest rates as per International Fisher Effect (IFE)?
Suppose, the exchange rate is fixed and does not change, which currency will appreciate or depreciate in real terms? Which country will attract investment?
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Applied Quantitative Finance
Authors: W.; T. Kleinkow; G. Stahl Hardle
1st Edition
3540434607, 978-3540434603
