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What will happen to the foreign return schedule

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Reference no: EM133119163

Assume that initially the spot exchange rate is Edollar/euro=1.25 (i.e. the FX market is in equilibrium). Then the expected future exchange rate decreases to 1.21.

What will happen to the domestic return schedule as a result?

What will happen to the foreign return schedule?

Calculate and state the new equilibrium spot exchange rate.

Reference no: EM133119163

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