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Determine the six months forward exchange

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Reference no: EM132115579

Question - The following are the expected interest rates and inflation rates in Canada and Britain respectively over next six months

Country

Interest Rate

Inflation Rate

Canada

4%

2%

Britain

7%

4%

The spot rate between Canadian dollar (C$) and Great British pound is 2C$ = 1GBP.

Required - Determine the six months forward exchange between of the two currencies using the following approaches

a) Interest rate parity

b) Purchasing power parity.

Reference no: EM132115579

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