I always thought a higher risk free interest rate would make any currency increase in value, other things being equal. I am confused on 1:46, where the dollar has a higher risk free rate, but this makes the dollar go down to only £0.475? forward is trying to predict the spot rate in 1 year right? so you can lock it today. thanks
Dear Friends, I have a question: in IRP (Interest Rate Parity), the base rate of the two currencies is the nominal interest rate or the real interest rate announced by the central banks of the two countries?.
THANK YOU THANK YOU! This really helps me for my International Finance class, my professor did not provide any examples like this sadly :(
Haha.. I also watching this because tomorrow i have International Finance hope this video help me so
You kept it extremely simple, fair paly to you. Well done.
Brilliant video, thank you so much for such great content over your channel, real life saver! best from England
I always thought a higher risk free interest rate would make any currency increase in value, other things being equal. I am confused on 1:46, where the dollar has a higher risk free rate, but this makes the dollar go down to only £0.475? forward is trying to predict the spot rate in 1 year right? so you can lock it today. thanks
I've been struggling to understand this problem for the past few days. If you've found the answer please reply and help me figure it out. Many thanks.
I think it should be Rus-Re with a final result of .525 GBP for interest rate parity to hold.
However, depreciation of GBP when GBP has lower interest rates also doesn't make sense so I am not sure how this formula works.
Nicely explained.
Dear Friends, I have a question: in IRP (Interest Rate Parity), the base rate of the two currencies is the nominal interest rate or the real interest rate announced by the central banks of the two countries?.