Assume that interest rate parity holds. The UK five-year interest rate is 5% annualized, and the Brazilian five-year interest rate is 8% annualized. Today's spot rate of the Brazilian real is £0.25. What is the approximate five-year forecast of the real's spot rate if the five-year forward rate is used as a forecast?
A) £0.2431
B) £0.2571
C) £0.2878
D) £0.2165
E) £0.2175
Correct Answer:
Verified
Q6: MNCs can forecast exchange rate volatility to
Q13: Assume that the forward rate is used
Q15: Which of the following is the common
Q19: If the forward rate was expected to
Q20: According to the text,research supports _ in
Q20: Corporations tend to make only limited use
Q25: Factors such as economic growth, inflation, and
Q27: If points are scattered evenly on both
Q50: If foreign exchange markets are strong-form efficient,
Q53: When measuring forecast performance of different currencies,
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents