If the $:¥ spot rate is $1 = ¥218 and interest rates in Tokyo and New York are 6% and 12%, respectively, what is the expected $:¥ exchange rate one year hence?

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If the $:¥ spot rate is $1 = ¥218 and interest rates in Tokyo and New York are 6% and 12%, respectively, what is the expected $:¥ exchange rate one year hence?

 

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Darshita6.14K 0 Comments

Answer. According to the international Fisher effect, the dollar spot rate in one year should equal 218(1.06/1.12) = ¥206.32
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