What is expected the spot rate of the malaysian ringgit

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Problem 1: Assume that locational arbitrage ensures that spot exchange rates are properly aligned. Also, assume that you believe in the Purchasing Power Parity (PPP). The spot rate of the Singapore dollar(S$) against the Australian dollar(A$) is 0.8724 (A$/S$). The spot rate of the Malaysian ringgit(MYR) against the Singapore dollar is 0.4750 (S$/MYR). You expect that the one-year inflation rate is 6.03% in Singapore, 4.05% in Malaysia and 2.87% in Australia. The one-year interest rate is 9.82% in Singapore, 7.59% in Malaysia and 5.21% in Australia. What is your expected the spot rate of the Malaysian ringgit in one year with respect to the Australian dollar (A$/MYR)?

Reference no: EM132676279

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