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Assignment no.4 (1)

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Assignment no.4 (1)

  1. 1. Assignment No.4 International BusinessGroup: 1 Class: QTKDTK54Students: 1. Đinh Thị Ngân 2. Nguyễn Thị Hồng 3. Nguyễn Thị Thu Hường 4. Vũ Thị Yến 5. Nguyễn Thị Vân AnhQuestion 1:Answer:In South Korea, rW= 4%, IW= 2%. Thus, the nominal interest rate isiW = rW + IW = 4 + 2 = 6%In US, r = 7%, Inflation rate I$ = 5%, spot exchange rate isS1: $1= W1,200. So, the nominal interest rate i$ = r$ +I$ = 7 + 5 = 12%We have: (S1 - S2)/S2 x 100= i$ - iW (1,200 – S2)/S2 x 100 = 12 – 6 => S2 = 1,132.076To sum up, the spot exchange rate one year from today is$1=W1,132.076
  2. 2. Question 2:Answer: a. The $/£ spot exchange rate: E$/£ = P$/P£ = 2.8/3.7 = 0.76 b. The one-year forward $/£ spot exchange rate is: E’$/£ = P’$/P’£ = 3.1/4.65 = 0.67 c. The current interest rate in United States is i$=10% Let the current interest rate in Britain be i£ We have: (E$/£ - E’$/£)/ E’$/£ x 100 = i$ - i£ (0.76 – 0.67)/0.67 x 100 = 10 - i£ i£ = - 3.43

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