Define each of the expectations theory of forward rates

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Problem 1: You can find spot and futures prices for a variety of equity indexes on www.wsj.com. Pick one and check whether it is fairly priced. You will need to do some research work to find the dividend yield on the index and the interest rate.

Problem 2: Define each of the following theories accompanied by equations. Hypothetical examples are required.

a. Interest rate parity.

b. Expectations theory of forward rates.

c. Purchasing power parity.

d. International capital market equilibrium (relationship of real and nominal interest rates in different countries).

Reference no: EM132754276

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