The interest rate on South Korean government securities with one-year maturity is 4 percent, and the expected inflation rate for the coming year is 2 percent. The interest rate on U.S. government securities with one-year maturity is 7 percent, and the expected rate of inflation is 5 percent. The current spot exchange rate for Korean won is $1 = W 1,200. Forecast the spot exchange rate one year from today. Explain the logic of your answer.© BrainMass Inc. brainmass.com March 4, 2021, 5:58 pm ad1c9bdddf
Effective Interest Rate in Korea:- Real Interest Rate = Nominal Interest Rate - Inflation.
<br>So Real Interest Rate = ...
The expert forecasts spot exchange rates.