Suppose that the Eurozone is the domestic country and the United States is the foreign country. The spot exchange rate quote is S=e:$=$1.25. Suppose further that the expected annual U.S. inflation rate is 8.91 percent and the expected Eurozone annual inflation rate is 12.87 percent. Calculate the expected spot rate and the approximate expected spot rate one year away

Suppose the year 1, year 2 and year 3 forecasts for the rate of inflation in Denmark are 3%, 4% and 5% respectively. Suppose also that the year 1, year 2 and year 3 forecasts for the rate of inflation in France are 11%, 9% and 8% respectively. If the expected spot rate between the Danish Krone (DKK) and the EUR is EUR0.1344/DKK at the end of year 3, what is the current spot rate?   a.EUR0.119024/DKK b.EUR0.151762/DKK c.EUR0.111027/DKK d.EUR0.128269/DKK e. Not enough information to answer this question.

17

3.    The expected inflation rate in Oman is 3.5%. The current spot rate between OMR and INR is INR174.325/OMR and the expected spot exchange rate in one year is INR176.435/OMR. How much is the expected inflation rate in India?

Facing the increasing interest rate of the U.S. that will be even higher in the next several months, what is the trend of the exchange rate of your home country? If your home country runs a fixed exchange rates regime, what suggestions can you provide to the monetary authority?

Suppose that the interest rate on a US dollar deposit is 3% and the interest rate on a Japanese yen deposit is 1%. Today’s exchange rate is $1/¥ and the expected rate one year in the future is $1.2/¥, so $100 today can be exchanges for ¥100. Which currency deposit yield a higher expected rate of return (which currency investors should be willing to hold)? Why?

Assume that the Mexican peso currently trades at 11 pesos to the U.S. dollar. During the year U.S. inflation is expected to average 4%, while Mexican inflation is expected to average 5%. What is the current value of one peso in terms of U.S. dollars? Given the relative inflation rates, what will the exchange rates be 1 year from now? Which currency is expected to appreciate and which currency is expected to depreciate over the next year? The current value of one Mexican peso in terms of U.S. dollars, USS, is US$/MP. (Round to six decimal places.) Given the relative inflation rates, the exchange rate of one U.S. dollar in terms of Mexican pesos, MP, one year from now will be MP/US$. (Round to six decimal places.) Given the relative inflation rates, the exchange rate of one Mexican peso in terms of U.S. dollars, US$, one year from now will be US$ /MP. (Round to six decimal places.) ▼is expected to appreciate, while the is expected to depreciate over the next year. (Select from the…

On November 1, 1999, the exchange rate between the Brazilian real and U.S. dollar is R$1.95/$. The consensus forecast for the U.S. and Brazil inflation rates for the next 3-year period is 2.6% and 20.0% per year, respectively. What would you forecast the exchange rate to be at around November 1, 2002? R$3.6673/$ O R$3.1199/$ O R$2.6675/$ O R$2.2807/$

Suppose the british pound U-S.dollar exchange rate is currently So =£.50.Further suppose that the inflation rate in britain is predicted to be 10percent over the year coming year and(for the moment)the inflation rate in the united states is predicted to be zero. What do you think the exchange rate will be in a year

Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$):   Spot Exchange Rate One-Year Forward Exchange Rate Canadian dollar (U.S. dollar/Canadian dollar) 0.8842 0.9001   The current one-year interest rate on U.S. Treasury securities is 6.89%. If interest rate parity holds, what is the expected yield on one-year Canadian securities of equal risk? 4.75%   4.00%   5.00%   5.75%