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Forecast the outright value of dkk

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Reference no: EM132117200

The currency of Denmark is the Danish Kroner. or Krone, and we use DKK for it below:

Spot rate DKK 6.8911/$

12 month forward rate DKK 6.9866/$

Inflation in US2.0 percent/year

Inflation in Denmark 4.4 percent/year

Interest rate in US 3.2 PERCENT/YEAR

Interest rate in Denmark 5.5 percent/year

Based on the above information, answer the following questions.

Please note:

Use the accurate approach in forecasting in your computations

Carry your accuracy to at least four digits beyond the decimal points

Do not round the numbers in the internal steps of your computations. If you have to then at least keep four digits beyond the decimal points.

Do not convert amounts into millions or thoursands

1) Forecast the outright value of DKK for next year on the basis of the relative purchasing power parity

2) Forecast the outright value of DKK for next year on the basis of the international fisher effect

3) Forecast the outright value of DKK for next year on the basis of the unbiased theory of the forward rates

Reference no: EM132117200

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