Suppose the spot exchange rate for the Hungarian for int is HUF 197. Interest rates in the

Question:

Suppose the spot exchange rate for the Hungarian for int is HUF 197. Interest rates in the United States are 4.8 percent per year. They are 8.7 percent in Hungary.

(a) What do you predict the exchange rate will be in one year?

(b) In two years?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...