Using the following data on spot exchange rate of Poland against the U.S. dollar and the annual

interest rates of these two countries, forecast the outright values of 6 and 12 months ahead of the

Polish currency. Draw on the forecasting theories or parities that are the subject of Chapter 6 of

the book, and the other discussions we have had in this regard (e.g., lecture notes AMP06 and

Amp07). Use the more accurate approach.

Polish currency is called Zloty (= PLN)

Spot rate PLN 4.17/USD

US commercial interest rate 3.5 percent

Polish commercial interest rate 5.00 percent

Review the following questions.

1. The outright forecast for 6 months is:

2. The outright forecast for 12 months is:

3. The theory that you are using is called:

Purchasing power parity

Interest rate parity

Fisher effect

International fisher effect

4. This theory holds very well in the:

Short-run

Long-run

Chaotic periods only

None of the answers in this group is correct.

5. Based on this theory, the country that offers a higher rate of interest should expect a fall

in the value of its currency.

I agree

I disagree

You really cannot tell

Never heard of such a thing!

None of the answers in this group is correct.