One year interest rates are currently 3.30% in the U.S and 2.60% in "Euroland. The current spot rate between the euro and dollar is 1.3225/. What is the expected spot rate in one year if the international Fisher effect holds?
Assume you have 1 Euro right now.
If you deposit 1 Euro into the bank in Euorland, after 1 year, you will ...
The solution shows detailed calculation of the expected spot rate in one year between Euro and USD.