The current spot rate between the U.S. dollar and the Swedish krona is $1 = 6.87

Question

The current spot rate between the U.S. dollar and the Swedish krona is $1 = 6.8732 krona. Assume the inflation rate in the United States is 4 percent and in Sweden is 1 percent. What is the expected spot rate in one year? (Do not round intermediate calculations and round your final answer to 4 decimal places.) Convert the following indued quote to a dollar direct quote: $1 = 2, 150, 4 Venezuelan bolivar Convert the following indued quote to a dollar direct quote: $ 1 = 0.5467 Latvian lat Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Explanation / Answer

(1) Expected Spot Rate = Current spot rate x (1 + Inflation in Sweden) / (1 + Inflation in USA) = 6.8732 x (1.01 / 1.04) = $ 6.6749 per Krona

(2) Dollar-Bolivar Direct quote = 1 / indirect quote = $ 0.00046503

(3) Dollar-direct quote = 1 / indirect quote = $ 1.8292

(4) Answer = 1000000 / 0.2875 = RGT 3,478,260.87

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