ECOS3029 Week 6 Tutorial Exercises
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Week 6 Tutorial Exercises
1) The current value of the spot exchange rate SAUD_CNY = 0.2119. If the Chinese inflation rate for the coming year will be 2% while the Australian inflation rate will be 5%, what value of
the exchange rate SAUD_CNY 1 year from now would maintain Relative PPP?
2) Forward Premium. If FUSD_GBP = 1.723 and SUSD_GBP = 1.775 then calculate the forward premium.
3) Assume that (i) one-year forward exchange rate FUSD_GBP = 1.723; (ii) the current spot
exchange rate SUSD_GBP = 1.775; and (iii) the one-year interest rate for GBP is i ∗ = 4.885% . What must one-year USD interest rates be for Covered Interest Parity (CIP) to hold?
2023-09-15