Problem 31-11 The International Fisher Effect You observe that the inflation rate in the United States is 2.0 percent per year and that T-bills currently yield 2.5 percent annually. Use the approximate international Fisher effect to answer the following questions. a. What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 5 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) b. What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 8 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) c. What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Problem 31-11 The International Fisher Effect You observe that the inflation rate in the United States is 2.0 percent per year and that T-bills currently yield 2.5 percent annually. Use the approximate international Fisher effect to answer the following questions. a. What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 5 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) b. What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 8 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) c. What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Chapter9: Forecasting Exchange Rates
Section: Chapter Questions
Problem 32QA
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Problem 31-11 The International Fisher Effect
You observe that the inflation rate in the United States is 2.0 percent per year and that T-bills currently yield 2.5 percent annually. Use the approximate international Fisher effect to answer the following questions. |
a. |
What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 5 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) |
b. | What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 8 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) |
c. | What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) |
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