Us government securities with one-year maturity

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Q. The interest rate on South Korean government securities with one-year maturity is 4 percent and the expected inflation rate for the coming year is 2 percent. The interest rate on U.S. government securities with one-year maturity is 7 percent and the expected rate of inflation is 5 percent. The current spot exchange rate Korean won is $1 = W1, 200. Forecast the spot exchange rate one year from today. Explain the logic of your answer.

Reference no: EM13113138

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