International Fisher Effect. Use above information and the information from Part I question 5-2 to test International Fisher Effect. Does it hold for year 2014 and year 2015?
Forward Rate and Interest Rate Parity
1) Does forward market exist on your currency against US Dollar and/or other major currencies? Find the one year forward rate at the beginning of year 2014 and 2015.
2) Compute the difference between forward rate and spot rate. Is it a premium or discount at the beginning of year 2014 and 2015?
3) Use above results and information from question 1 to check if interest rate parity holds for year 2014 and 2015.