--%>
Assignment Help - homework help

Interest rate parity for determination of the exchange rate

Describe the allegations of interest rate parity for the determination of the exchange rate.

E

Expert

Verified

Supposing that the forward exchange rate is approximately an unbiased predictor of future spot rate, IRP is written as:

          S = [(1 + I£)/(1 + I$)]E[St+1?It]. 

Exchange rate is therefore estimated by relative interest rates, and expected future spot rate, conditional on the available information, It, as of the present time. One therefore may say that the expectation is self-fulfilling. As information set will be constantly updated as soon as the news comes in the market, exchange rate will display the highly dynamic, random behavior.

   Related Questions in Financial Accounting

  • Q : International and financial management

    Explain, how international financial management is different from the domestic financial management?

    		•
  • Q : Discrimination to women and minority

    Most of the organizations have established policies to remedy discrimination whenever hiring women and minorities. Discuss whether you feel that affirmative action programs, reverse discrimination, and criteria of comparable worth are suitable forms of remedy. You mus

    		•
  • Q : Prepare the journal entry to record the

    The Webster Company uses the aging method to estimate the allowance for doubtful accounts. The following schedule of accounts receivable was prepared as at December 31, 20x6: Age Balance % uncollectible 0-30 days $674,000 0.5% 31-60 days 186,000 1.2% <

    		•
  • Q : Development phases of Friendship There

    There are six developmental phases of how friendships develop. Identify each phase in sequence and discuss the characteristics of each phase by using real or hypothetical example to illustrate this developmental path.

    		•
  • Q : Characteristics of international and

    Explain characteristics of the international and the domestic banks.

    		•
  • Q : Interest rate Give me answer of this

    Give me answer of this question. The prime interest rate usually: A) rises when the Federal funds rate rises. B) rises when the discount rate falls. C) falls when the Federal funds rate rises. D) falls when the Fed sells bonds in the open market

    		•
  • Q : Matlab Applications in Image and Video

    Image and video processing is most difficult topic in electrical and electronics field. This topic becomes trickier if you are taking use of Matlab in this. Student faces a lot of problem in image and video processing theories. If you are messed up with same difficulties

    		•
  • Q : Define Financial Accounting Give a

    Give a brief introduction of the term ‘Financial Accounting’. And also write down its elements?

    		•
  • Q : Evaluate the impact of a recent

    A 2000 word essay (maximum allowed 2,200) Accessing Learning Outcomes: Knowledge 1 and 2 Skills 1, 2, 3 and 5                 "Evaluate the impact of a recent healthcare initiative on nursing practice".<

    		•
  • Q : Describe Long Holding Period Describe

    Describe Long Holding Period briefly with suitable example?

    		•