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. Use the more accurate approach. Polish currency is called Zloty (= PLN) Spot rate PLN 4.26/USD US inflation rate 2.2 percent Polish inflation rate 4.4 percent.

1. outright forecast for 6 month is

2. outright forecast for 12 month 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 well in the

short run long run chaotic periods only

5. based on this theory the country that has a higher rate of inflation should expect a rise in the value of its currency

agree disagree not sure