6. Suppose that in Japan the interest rate is 8% and inflation is expected to be 3%. Meanwhile, the expected inflation rate in France is 12%, and the English interest rate is 14%. To the nearest whole number, what is the best estimate of the one year forward exchange premium (discount) at which the pound will be selling relative to the French franc?
ANSWER. Based on the numbers, Japan's real interest rate is about 5% (8% - 3%). From that, we can ...
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