Forward rate as forecast of the future spot rate

Assignment Help Financial Management

Reference no: EM132061289

a. Mexican interest rates are normally substantially higher than U.S. interest rates. What does this imply about the forward rate as a forecast of the future spot rate?

b. Does the forward rate reflect a forecast of appreciation or depreciation of the Mexican peso? Explain how the degree of the expected change implied by the forward rate forecast is tied to the interest rate differential.

c. Do you think that today’s forward rate or today’s spot rate of the peso would be a better forecast of the future spot rate of the peso.

Reference no: EM132061289

Questions Cloud

Repurchases rather dividends under classical tax system : Briefly discuss five reasons for companies to choose repurchases rather dividends under a classical tax system.

What would be the impact on bank net interest income : what would be the impact on the bank’s net interest income if, at the end of the first year, all interest rates increased by 1 percentage point?

What are the implications for economic exposure : Why might the demand for your business change if you shift your invoice policy? What are the implications for economic exposure?

Discuss these hypotheses related to dividend policy : Discuss these hypotheses related to dividend policy.

Forward rate as forecast of the future spot rate : What does this imply about the forward rate as a forecast of the future spot rate?

What is standard deviation of the holding period returns : What is the standard deviation of the holding period returns (of this historical sample)?

Mexican peso will appreciate or depreciate : Does this imply that the Mexican peso will appreciate or depreciate?

Company capital increase and share expansion : Assuming that this year's company's capital increase and share expansion, what factors may lead to price earnings ratio rising from 20 to 90?

Prepare statement of cash flows in good form : Prepare a Statement of Cash Flows in good form. Prove to the CFO that you have completed it correctly.

User Account

All Pages