Question

) Countries Mali and South Africa have their interest rates to be 16% and 12 %,...

) Countries Mali and South Africa have their interest rates to be 16% and 12 %, respectively. If their currencies trade according to 50 CFA francs buy one rand in the spot market, what will their future spot rate be in the aforementioned context? 2) Define IFE and explain the fact of how it occurs. Is there any deviation from it?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. Future spot rate= Spot rate (1+interest rate in Mali)/(1+interest rate in South Africa)

= 50(1.16)/(1.12)

= CFA Frans 51.78

2. International fisher effect will advocate that the difference in the future spot rate and current spot rate of two different currencies will be equal to interest rate differential in both the countries.

it is advocating that the disparity between exchange rate of two currencies will be equal to the disparity between the interest rate of those two countries.

In this case, the future price between these two currencies has been arrived after considering the interest rate differential and Hence, the international fisher theory has been properly followed and there is no deviation from it.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
B. 1) Countries Mali and South Africa have their interest rates to be 6% and 12%,...
B. 1) Countries Mali and South Africa have their interest rates to be 6% and 12%, respectively. If their currencies trade according to 50 CFA francs buy one rand in the spot market, what will their future spot rate be in the aforementioned context? 2) Define IFE and explain the fact of how it occurs. Is there any deviation from it?
1. a)Countries Australia and France have their interest rates to be 8% and 12 %, respectively....
1. a)Countries Australia and France have their interest rates to be 8% and 12 %, respectively. If their currencies trade according to 2 Australian $s buy one euro in the spot market, what will their future spot rate be in the aforementioned context? b) Define IFE and explain the fact of how it occurs. Is there any deviation from it?
Suppose 1-year interest rates are 11% in South Africa and 4% in the United States. The...
Suppose 1-year interest rates are 11% in South Africa and 4% in the United States. The current spot rate of the South African Rand (ZAR) is USD 0.12. Forward contracts on ZAR are available with a 7% discount. Question: Can a US-based investor successfully use Covered Interest Arbitrage in South Africa?
1. When interest rates in Australia decrease relative to interest rates in other countries, we may...
1. When interest rates in Australia decrease relative to interest rates in other countries, we may see Australian dollar Select one: a. depreciation and a decrease in net exports. b. appreciation and an increase in net exports. c. appreciation and a decrease in net exports. d. depreciation and an increase in net exports. 2. We can expect an increase in the value (appreciation) of the Australian dollar relative to Indian rupiah when Select one: a. Indian economy is going into...
Can I have your opinion on this research and possible correction? The global economy and government’s...
Can I have your opinion on this research and possible correction? The global economy and government’s ability to control its country’s currency. Definition of terms Global economy is an economic interdependence established between the most influential countries that drives the worldwide economic environment. It is also the aggregate economic output, movement and influence of all countries. (My Accounting course). Currency is the medium of exchange for goods and services. In short, its money, in the form of paper or coins,...
Chapter 1 Running Your Own MNC Developing Your Idea Create an idea for your own MNC...
Chapter 1 Running Your Own MNC Developing Your Idea Create an idea for your own MNC to conduct international business. Your idea should be simplified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be successful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. So that you can recognize the issues...
1.) Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and...
1.) Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and co-directors of the company’s pension fund management division. An important new client, the North-Western Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions. a. What are the key features of a bond? b....
1.) True or False? For all societies, resources are scarce, and technology is limited, while people’s...
1.) True or False? For all societies, resources are scarce, and technology is limited, while people’s wants and needs for goods and services seem to be unlimited. (2 points) 2.) (1 point) Adam Smith’s “invisible hand” refers to a.) the subtle and often hidden methods that businesses use to profit at consumers’ expense. b.) the ability of free markets to reach desirable outcomes, despite the self-interest of market participants. c.) the ability of government regulations to benefit consumers, even if...
Please read the article and answear about questions. Determining the Value of the Business After you...
Please read the article and answear about questions. Determining the Value of the Business After you have completed a thorough and exacting investigation, you need to analyze all the infor- mation you have gathered. This is the time to consult with your business, financial, and legal advis- ers to arrive at an estimate of the value of the business. Outside advisers are impartial and are more likely to see the bad things about the business than are you. You should...
What role could the governance of ethics have played if it had been in existence in...
What role could the governance of ethics have played if it had been in existence in the organization? Assess the leadership of Enron from an ethical perspective. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies, collapsed in 2001 under a mountain of debt...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT