Explain the problem with the international fisher effect

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Reference no: EM131915044

1. Suppose the coupon rate on a 30-year maturity, $1000 par value bond is 8% and that 30 days have passed since the last coupon payment. What is the accrued interest on the bond? How much will you pay for the bond if the bond is quoted at $990?

2. Please explain the problem with the International Fisher Effect, why do positive interest difference across two countries may cause the FX rate to rise or fall.

3. In your own words exaplain,What is the problem with using PPP to predict FX rates in the short-run?

Reference no: EM131915044

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