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purchasing power &interest rate parity

This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.

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February 2, 2017 at 4:10 pm #370783
heidy
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when applying the two formulas , when to put the foreign country inflation rate or interest rate and base country’s inflation rate or interest rate in numerator and denominator ?
Hc means inflation rate of foreign country?
Ic means interest rate of foreign country?
Thanks
February 2, 2017 at 4:27 pm #370794
John Moffat
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What you have written is correct.
But why not watch my free lectures? They are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
February 2, 2017 at 4:55 pm #370801
heidy
Member
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Thanks John!
But then why in the F9 Sep 2016 , MCQ 12 , ” the future spot rate after one year should be 1.4571dinar per $1″ is correct? Thanks!
February 3, 2017 at 8:13 am #370869
John Moffat
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Since the quote is dinars per $, then country X (using $’s) is the base country and country Y (using dinars) is the other country.
So the forward rate is 1.500 x 1.02/1.05
Again, I suggest that you watch the free lectures!
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