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. D 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.