Question

Given a current spot rate of 8.46 Swedish krona per U.S. dollar, expected inflation rates of 4% per annum in the U.S. and 5% in Sweden, use the formula for relative purchasing power parity to estimate the one-year (forward) spot rate of krona per dollar.

Answer #1

The current spot rate between the euro and dollar is €1.0957/$.
The annual inflation rate in the U.S is expected to be 2.98 percent
and the annual inflation rate in euroland is expected to be 2.43
percent. Assuming relative purchasing power parity holds, what will
the exchange rate be in two years?

24.
Assume the spot exchange rate is £.6229. The expected inflation
rate in the U.K. is 3.8 percent and in the U.S. it is 2.9 percent.
What is the expected exchange rate three years from now if relative
purchasing power parity exists?
£.5391
£.6062
£.6399
£.6285
£.6233

Assume the spot exchange rate is 106.90 Japanese yen per U.S.
dollar. If the inflation rate in the U.S. is expected to be 2% and
the inflation rate in Japan is 1% for the next two years, then
the:
exchange rate will increase.
exchange rate will double.
dollar will appreciate relative to the yen.
dollar will become more valuable.
Yen will strengthen against the dollar.

If the spot exchange rate is 0.62 euro per Canadian dollar and
the three-month forward rate is 0.60 euro per
Canadian dollar, then the ________ on the Canadian dollar in
percentage (at an annual rate) is roughly
________.
Select one:
a. forward premium, 3.226%
b. forward premium, 12.90%
c. forward discount, 12.90%
d. forward discount, 3.226%
The 1-year interest rates on Canadian dollar and U.K. pound are
2 % and 5 % respectively. If the current spot rate is 2...

The spot rate for the Omani Rial is $2.6008/Rial. The U.S.
inflation rate is anticipated to be 1.3%. The Oman inflation rate
is expected to be 7.5%. Both countries are expected to have a real
interest rate of 1.5%. Show calculations.
A.) Based on the Fisher effect, calculate the U.S. nominal
interest rate (x.xx%).
B.) Based on the Fisher effect, calculate the Uzbekistan nominal
interest rate (x.xx%).
C.) Using purchasing power parity, calculate the expected spot
rate in 1 year....

The annual inflation rate in the US is expected to be 6%, while
it is expected to be 2.5% in Australia. The current spot rate(on
10/07/18) for the Australian Dollar (AD) is $0.85.
Required
i) According to Purchasing Power Parity, estimate the expected
percenatage change in the value of the AD during a one-year period
and calculate its AD expected values at 10/07/19.
ii) Suppose the value of the AD turned out to be $0.865 on
10/07/18, what is the...

1. You observe that one U.S. dollar is currently equal to 3.6
Brazilian reals in the spot market. The one year US
interest rate is 7% and the one year Brazilian interest rate is 4%.
One year later, you observe that one U.S. dollar is now equal to
3.2 Brazilian reals in the spot market. You would have made a
profit if you had:
Borrowed U.S. dollars and invested in U.S. dollars
Borrowed Brazilian reals and invested in Brazilian reals
Borrowed...

4. Given an interest rate for GBP at 14%/year, expected
inflation rates forecasts for GBP at 12%/year and CHF at 4.0/year,
and the following spot exchange rate quote: GBP/CHF 2.0, use
international parity relations (IRP, PPP, and International Fisher)
to determine the 1-year CHF interest rate, as well as the expected
spot exchange rates and 1-year forward exchange rate.

Quantitative Problem: International Machinery
Company (IMC) is a Swedish multinational manufacturing company.
Currently, IMC's financial planners are considering undertaking a
1-year project in the United States. The project's expected
dollar-denominated cash flows consist of an initial investment of
$3,000 and a cash inflow the following year of $3,950. IMC
estimates that its risk-adjusted cost of capital is 14%. Currently,
1 U.S. dollar will buy 7.3 Swedish kronas. In addition, 1-year
risk-free securities in the United States are yielding 2%, while...

Assume the the U.S. dollar and the Canadian dollar are initially
in equilibrium. However the inflation rate in the U.S. is 2.5% and
the inflation rate in Canada is 1%. The theory of purchasing power
parity suggests which of the following is true?
1.
We expect the USD to appreciate 1.5% relative to the CAD
2.
We expect the USD to deppreciate 1.5% relative to the CAD
3.
We expect the USD to appreciate 1.46% relative to the CAD
4....

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