"The spot exchange rate for Brazilian Real is Real4.1/$, while the 9 months forward exchange rate is Real4.5/$. This implies that"Owe cannot make any conclusions about the interest rates in US and Brazil based on the given numbersthe 9-months risk-free interest rate in US is lower than that in Brazilthe 9-months risk-free interest rate in US is the same as that in Brazilthe 9-months risk-free interest rate in US is higher than that in Brazil

As per the interest rate parity, Forward rate = (spot rate * (1 + brazil interest rate)) / (1 + US…

179, wille une this forward exchange rate is Real4.5/$. This implies that we cannot make any conclusions about the interest rates in US and Brazil based on the given numbers O the 9-months risk-free interest rate in US is lower than that in Brazil O the 9-months risk-free interest rate in US is the same as that in Brazil the 9-months risk-free interest rate in US is higher than that in Brazil

179, wille une this forward exchange rate is Real4.5/$. This implies that we cannot make any conclusions about the interest rates in US and Brazil based on the given numbers O the 9-months risk-free interest rate in US is lower than that in Brazil O the 9-months risk-free interest rate in US is the same as that in Brazil the 9-months risk-free interest rate in US is higher than that in Brazil

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 25QA

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