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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The Interest Rate Parity formula is:
1 + Malaysian interest rate = (Forward ...
Solution Summary
The solution solves a problem using the Interest Rate Parity formula.
$2.49