The spot exchange rate for the Polish zloty (PLN) is USD 0.2500 / PLN 1. The one
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Question
The spot exchange rate for the Polish zloty (PLN) is USD 0.2500 / PLN 1. The one-year forwardexchange rate is USD 0.2529 / PLN. The one year LIBOR for U.S. dollars is 1.15475 %. Assumethat the market risk premium is 7.5%.
Suppose uncovered interest rate parity and the unbiasedness hypothesis do not hold. If theexpected spot rate in one year is USD 0.2545 / PLN, what is the PLN uncovered beta? You need to use the PLN interest rate implied by covered interest rate parity, which is -.0051898% (Round to two places to the right of the decimal.)
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Explanation / Answer
2.23010 need to use the PLN interest rate implied by covered interest rate parity.
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