The spot exchange rate for the Thai bhat is 30.000 bhat to the Australian dollar or .00333 dollar to the bhat.For capital budgeting purposes,Ramo Corp needs to estimate the exchange rate 5 years from now.The Australian interest rate is 2%;the interest rate in Thailand is 6%.The estimated 5 year forward rate is

Question

Quizplus · Accepted Answer

The forward exchange rate can be estimated using the interest rate parity formula: Forward Rate = Spot Rate * (1 + Interest Rate of Domestic Country) / (1 + Interest Rate of Foreign Country). Applying this: 30 * (1 + 0.02)^5 / (1 + 0.06)^5 = 36.36 bhat to the dollar.

The Spot Exchange Rate for the Thai Bhat Is 30