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    International Finance Problem: The Interest Rate Parity formula

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    The current spot rate is Ringett 2.5/SF. The expected spot rate in one year is Ringett 2.8/SF. The current Swiss interest rate is 8%. What Malaysian interest rate will cause IFE to hold?

    The correct answer is 12.32%. I left this problem blank because I followed this formula:
    S1-S2/S2 = i$-iyen/1+iyen

    (Note the Yen and USD symbols are used as just an example) In this math problem I would have to use the ringett and the SF (swiss franc).

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    Solution Preview

    The Interest Rate Parity formula is:
    1 + Malaysian interest rate = (Forward ...

    Solution Summary

    The solution solves a problem using the Interest Rate Parity formula.