标题: F/X question - what am i missing here? [打印本页] 作者: zbird2134 时间: 2013-4-10 21:14 标题: F/X question - what am i missing here?
The domestic interest rate is 9% and the foreign interest rate is 7%. If the forward exchange rate is 5 domestic units per foreign unit, what spot exchange rate is consistent with interest rate parity?
A) 4.83.
B) 5.09.
C) 4.91.
Your answer: B was incorrect. The correct answer was C) 4.91.
If the domestic interest rate is higher than the foreign, doesn’t it hold that the domestic currency should depreciate? So right now, 1 foreign unit can buy me 5 domestic units. If the domestic depreciates, shouldn’t 1 Foreign unit buy me more than 5 domestic units? I feel like this F/X should be easy, but i’m always getting things backwards and screwing it up….作者: Roflnadal 时间: 2013-4-10 21:24
F is DC/FC
for S to be DC/FC mode
so S*[(1+rdc)/(1+rfc)] = F作者: dreampak 时间: 2013-4-10 21:27
ah yes… DC:FC = FC/DC
that makes it correct. Giving the forward rate as DC/FC makes it tricky!
I should have caught that, sonovabitch!
