Determine the international fisher effect

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Reference no: EM13909028

With a minimal amount of research, you determine the following information regarding the U.S. dollar and the British Pound: United States Great Britain

Investor’s Required Rate of Interest (real) 2.25% 2.25%

Nominal interest rate 9.0 12.75

Spot Rate $1.56/ £

6-month forward rate $1.54/ £

Call premium at strike price of $1.56 2.25%

With the above information, determine the following: Future $ spot rate in 6 months of the dollar to the pound. Using the Fisher Effect relationship, determine the expected inflation. Determine the International Fisher Effect.

Reference no: EM13909028

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