- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 8. Currency Exchange Rates: Understanding Equilibrium Value
- Subject 3. A Long-Term Framework for Exchange Rates
CFA Practice Question
Suppose the forward discount for the dollar is 2% per year, and the current spot rate is 108.40Yen/$. Based on the hypothesis of uncovered interest rate parity, what is the expected spot rate in one year?
Correct Answer: If the forward discount for the dollar is 2% per year, the dollar is expected to depreciate and the expected spot rate would be 108.40 - (1 - .02) = 106.23Yen/$.
User Contributed Comments 1
| User | Comment |
|---|---|
| GileOne | 108.40 * 0.98=106.23 |