2. Interest rates are currently 2% in the US and 3% in Germany. The current spot...
2. Interest rates are currently 2% in the US and 3% in Germany. The current spot rate between the € and $ is $1.5/€. What is the expected spot rate in one year if the international Fisher effect holds? (Answer:1.4854$/€)
Homework Answers
S(t+1) = ((1+2%)/(1+3%)) x (1.5)
S(t+1) = 0.9903 x 1.5
S(t+1) = 1.4854
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