Suppose that the interest rate on dollar accounts is equal to 2% (i_$ = 0.02), the interest rate on Polish zloty accounts is equal to 4.5% (i_z? = 0.045), and the expected exchange rate between the dollar and the zloty one year from now is e^e = 4 z?/$. Assume that the (uncovered) interest parity holds.

Find the spot exchange rate, e. (Answer in z?/$ and round to the nearest tenth.)

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Calculating the Spot Exchange Rate e According to the Uncovered Interest ... View the full answer