Question

. a. The dollar is presently worth .8 euros. What is the direct exchange rate of the euro?

b. The direct exchange rate of the euro is presently valued higher than it was last month. What does this imply about the movement of the indirect exchange rate of the euro over the last month?

c. The Wall Street Journal quotes the Australian dollar to be worth $.50, while the one-year forward rate of the Australian dollar is $.5) if the one-year forward rate is used to predict the value of the Australian dollar in one year 1. What is the forward rate premium? What is the expected rate of appreciation (or depreciation?

Answer 1

a. direct exchange rate of the euro?
=1/0.8=1.25 dollars per euro

b.
It is lower than last month

c. The Wall Street Journal quotes the Australian dollar to be worth $.50, while the one-year forward rate of the Australian dollar is $.5) if the one-year forward rate is used to predict the value of the Australian dollar in one year 1. What is the forward rate premium? What is the expected rate of appreciation (or depreciation?

See the underlined part

If it is typo and u meant 0.50, then forward premium is 0 and expected appreciation=0%