Illustrate what is your forecast of the future value

Reference no: EM1330185

Future value of the domestic currency

Question

Suppose the interest rate on a domestic debt instrument is 10% and the expected rate of inflation is 5%. Further, suppose that the foreign nominal rate on a similar instrument is 6% and expected foreign inflation rate is 4%. Based upon the real interest rates what is your forecast of the future value of the domestic currency? Explain.

Reference no: EM1330185

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