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International Financial Management 6th Edition by Sanjiv Eun, Cheol Resnick, Bruce Sabherwal
Edition 6ISBN: 978-0071316972International Financial Management 6th Edition by Sanjiv Eun, Cheol Resnick, Bruce Sabherwal
Edition 6ISBN: 978-0071316972 Exercise 18
(CFA question) Omni Advisors, an international pension fund manager, uses the concepts of purchasing power parity (PPP) and the International Fisher Effect (IFE) to forecast spot exchange rates. Omni gathers the financial information as follows: 
Calculate the following exchange rates (ZAR and USD refer to the South African rand and U.S. dollar, respectively).
a. The current ZAR spot rate in USD that would have been forecast by PPP.
b. Using the IFE, the expected ZAR spot rate in USD one year from now.
c. Using PPP, the expected ZAR spot rate in USD four years from now.
Calculate the following exchange rates (ZAR and USD refer to the South African rand and U.S. dollar, respectively).a. The current ZAR spot rate in USD that would have been forecast by PPP.
b. Using the IFE, the expected ZAR spot rate in USD one year from now.
c. Using PPP, the expected ZAR spot rate in USD four years from now.
Explanation
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International Financial Management 6th Edition by Sanjiv Eun, Cheol Resnick, Bruce Sabherwal
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