4 Omni Advisors An International Pension Fund Manager Uses The Concepts Of Purchasing Power Parity Ppp And The Inte 1 (30.18 KiB) Viewed 66 times
4 Omni Advisors An International Pension Fund Manager Uses The Concepts Of Purchasing Power Parity Ppp And The Inte 2 (22.65 KiB) Viewed 66 times
4. Omni Advisors, an international pension fund manager, uses the concepts of purchasing power parity (PPP) and the International Fisher Effect (FE) to forecast spot exchange rates. Omni gathers the financial Information as follows: Base price level 100 Current U.S. price level 105 Current South African price level 111 Base rand spot exchange rate 50.195 Current rand spot exchange rate 30.178 Expected annual u.s. inflation 75 Expected annual South African inflation 55 Expected U.S. one-year interest rate 105 Expected South African one-year interest rate 88 Calculate the following exchange rates (ZAR and USD refer to the South African rand and U.S. dollar, respectively): a. The current ZAR spot rate in USD that would have been forecast by PPP. (Do not round intermediate calculations. Round your answer to 4 decimal places.) ZAR spot rate under PPP b. Using the IFE, the expected ZAR spot rate in USD one year from now. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Expected ZAR spot rate
b. Using the IFE, the expected ZAR spot rate in USD one year from now. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Expected ZAR spot rate c. Using PPP, the expected ZAR spot rate in USD four years from now. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Expected ZAR under PPP Prey 4 of 4 !!! Next
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!