Holooly Rewards

We are determined to provide the latest solutions related to all subjects FREE of charge!

Please sign up to our reward program to support us in return and take advantage of the incredible listed offers.

Enjoy Limited offers, deals & Discounts by signing up to Holooly Rewards Program

Holooly Ads. Manager

Advertise your business, and reach millions of students around the world.

Holooly Tables

All the data tables that you may search for.

Holooly Arabia

For Arabic Users, find a teacher/tutor in your City or country in the Middle East.

Holooly Sources

Find the Source, Textbook, Solution Manual that you are looking for in 1 click.

Holooly Help Desk

Need Help? We got you covered.

Chapter 9

Q. 9.ST.1

Assume that the annual U.S. return is expected to be 7 percent for each of the next 4 years, while the annual interest rate in Mexico is expected to be 20 percent. Determine the appropriate 4-year forward rate premium or discount on the Mexican peso, which could be used to forecast the percentage change in the peso over the next 4 years.


Verified Solution

U.S. 4-year interest rate = ( 1 + .07 )^{4} = 131.08%, or 1.3108. Mexican 4-year interest rate = ( 1 + .20)^{4} = 207.36%, or 2.0736

p=\frac{1 + i_{b}}{1+ i_{f}}-1=\frac{1.3108}{2.0736} -1

= -.3679, or -36.79%