If the current spot rate between the U.S. dollar and the Netherland Antilles guilder was $1 = 1.54 guilder, and if the inflation rate in the United States was 2 percent and in the Netherland Antilles it was 8 percent, then what would be the expected spot rate in one year?

Question

Quizplus · Accepted Answer

The expected spot rate in one year can be calculated using the following formula:Expected spot rate = Current spot rate * (1 + Inflation rate in the US) / (1 + Inflation rate in the Netherland Antilles)Plugging in the given values, we get:Expected spot rate = 1.54 * (1 + 0.02) / (1 + 0.08) = 1.4476Therefore, the expected spot rate in one year is $1.4476, which corresponds to choice C.

If the Current Spot Rate Between the U