In july the one-year interest rate is 12 on british pounds, Ask an Expert

Management Studies

In July, the one-year interest rate is 12% on British pounds and 9% on U.S. dollars.

a. If the current exchange rate is $1.63 : £1, what is the expected future exchange rate in one year?

b. Suppose a change in expectations regarding future U.S. inflation causes the expected future spot rate to decline to $1.52 : £1. What should happen to the U.S. interest rate?

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Business Management, Management Studies

Category:- Business Management
Reference No.:- M92033200

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