Question
The spot rate of the UK pound is $1.90/. The spot rate of the Swiss franc (in pounds) is 0.3/SF. We expect that inflation over
The spot rate of the UK pound is $1.90/. The spot rate of the Swiss franc (in pounds) is 0.3/SF. We expect that inflation over the coming year will be 6% in Switzerland and 1% in the US. According to Purchasing Power Parity, what is the expected spot rate of the Swiss franc in one year with respect to the U.S. dollar ($/SF)? Assume that arbitrage keeps spot exchange rates properly aligned.
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Global Banking
Authors: Roy C Smith, Ingo Walter, Gayle DeLong
3rd Edition
0195335937, 9780195335934
