Calculate whether international parity holds

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Reference no: EM133378489

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Paul Spiro then wishes to determine if the Australian Dollar (AUD) and IndonesianRupiah (IDR) are exhibiting parity like conditions. He observes the following data:

Spot AUD/IDR10,678

1 year Forward AUD/IDR10,342

Indonesia CPI 9%

Australia CPI 7%

1 year % Indonesia 4.2%

1 year % Australia 2.75%

Question 1: Calculate whether international parity holds between the AUD and IDR? Drawa diagram to illustrate your explanation.

Question 2: Calculate the forecasted change in the AUD/IDR twelve months from now

Reference no: EM133378489

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