Exchange rate be four periods from now according to ppp

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Reference no: EM133432473

Question:

(1) Suppose the exchange rate for the Mexican Peso was $0.100 in Jan 2020 and $0.105 in January 2021. Which currency ($ or peso) appreciated/depreciated? By how much is the appreciation/depreciation?

(2)Assume a trade relationship that allows free movement of capital between U.S. and Germany. Briefly discuss, with strong theoretical support, the impact of a relative rise in U.S interest rate on the dollar/euro exchange rate.

[ In your discussion, include the role of the "Fisher effect"]

(3) Consider the following information: U.S dollar/Zloty spot rate $0.23 U.S. interest rate.. 4.75% Polish interest.. 6.75%

What will the dollar/ zloty exchange rate be four periods from now according to PPP?

Reference no: EM133432473

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