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What would you forecast the exchange rate to be

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Q1. As of November 1, 1999, the exchange rate between the Brazilian real and U.S. dollar is R$1.73/$. The consensus forecast for the U.S. and Brazil inflation rates for the next 1-year period is 3.3% and 17.3%, respectively. What would you forecast the exchange rate to be at around November 1, 2000?

a. 1.52

b. 1.93

c. 1.96

d. 1.57

Q2. A foreign exchange trader with a U.S. bank took a short position of £2,000,000 when the $/£ exchange rate was 1.51. Subsequently, the exchange rate has changed to 1.46. By how much has the bank's liability changed because of the change in the exchange rate?

a. 170000

b. 180000

c. 100000

d. 160000

Reference no: EM133048186

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