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The “Market” section of the Bloomberg website provides interest rate quotations for numerous currencies. Its address...

The “Market” section of the Bloomberg website provides interest rate quotations for numerous currencies. Its address is www.bloomberg.com.

Go to the “Rates and Bonds” section and then click on each foreign country to review its interest rate. Determine the prevailing 1-year interest rate of the Australian dollar, the Japanese yen, and the British pound. Assuming a 2 percent real rate of interest for savers in any country, determine the expected rate of inflation over the next year in each of these countries that is implied by the nominal interest rate (according to the Fisher effect).

What is the approximate expected percentage change in the value of each of these currencies against the dollar over the next year when applying PPP to the inflation level of each of these currencies versus the dollar?

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