How do purchasing- power parity, interest rate parity, and the Fisher effect explain the relationships among the current spot rate, the future spot rate, and the forward rate?
Answer to relevant QuestionsWhat is the relationship between financial decision making and risk and return? Would all financial managers view risk– return trade- offs similarly? Explain the term opportunity cost with respect to the cost of funds to the firm. Why is an investment- banking syndicate formed? What is meant by (a) Exchange risk and (b) Political risk? A McDonald’s Big Mac costs 2.44 yuan in China, but costs $ 4.20 in the United States. Assuming that purchasing- power parity (PPP) holds, how many Chinese yuan are required to purchase 1 U. S. dollar?
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