--%>
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 : Relationship-To Look for in each other

    What is Relationship and what are the traits that make any relationship happy and committed forever ?

    		•
  • Q : Income Tax and Investment Calculator

    Introduction Your task is to produce a Java program, which can calculate income tax and investment growth based on the yearly income/salary of an individual. Below the details are descr

    		•
  • Q : Meaning of Goodwill Meaning of Goodwill

    Meaning of Goodwill: Goodwill puts the association at a good position due to which the organization is capable to earn huge profits without any additional efforts. Goodwill can’t be seen although felt. Thus goodwill is termed as an Intangible as

    		•
  • Q : Elder Abuse Explain the term Elder

    Explain the term Elder Abuse in brief ?

    		•
  • Q : Goals of Social Democrats What were the

    What were the goals of Social Democrats? What did Anarchists want?

    		•
  • Q : Evaluation of political risk State the

    State the factors you would consider in the evaluation of the political risk related to the making of FDI in the foreign country?

    		•
  • Q : Explain Return on Assets or ROA Return

    Return on Assets (ROA): It is an indicator of how gainful a company is associative to its net assets. ROA provides an idea as to how proficient management is at employing its assets to produce earnings. Computed by dividing a company's annual earnings

    		•
  • Q : What is Asset Disposition Asset

    Asset Disposition: Getting rid of the asset or security via a direct sale or some other technique. Quite frequently you will observe insider trades report a "disposition" of some number of shares; this merely means that they sold them.

    Q : Monetary/nonmonetary and temporal method

    Discuss dissimilarity in translation process between monetary/nonmonetary and temporal method.

    		•
  • Q : Implement a user-defined matlab

    Your solution to the problem should be housed within a while loop, which allows the grader to test your solution repeatedly without having to re-execute the script, as shown in class. You should first display the purpose of the program, and then you should prompt the

    		•