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The current exchange rate for the US $ against the £is $/£1.84.
Inflation in the US is 5%p.a,whereas it is 4% p.a in the UK.
what would you expect the exchange rate to be in 2 years time,based on the above information?Please show working . Thanks
Have you watched the free lectures? They are a complete course for F9 covering everything needed to be able to pass well.
Forecasting exchange rates uses the formula that is on the formula sheet:
1.84 x (1.05/1.04)^2 = 1.88
Thank you so much. I was little confused because normally asked 3 months or 6 months but this question they asked 2 years. I am following FTC(Kaplan) Notes and I didn’t find this particular kind of question yet.
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