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Make the foreign exchange market expects the peso

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Reference no: EM132954177

Assume:

  • A zero coupon 80,000 won bill that matures in 1 year is currently trading at 76,000 won.
  • A zero coupon 120,000 peso bill that matures in 1 year is trading at 110,000 pesos.
  • The peso is currently trading at 8 won
  • Uncovered interest parity holds.

Problem 1: Based on this information, the foreign exchange market expects the peso to [A] (appreciate, depreciate) against the won by [B] percent in 1 years' time. (Round your number to the nearest 3 decimal points)

Reference no: EM132954177

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