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Forecasting the 2-Year and 4-Year Exchange Rates
How to forecast the two-year and four-year exchange rates for the SGD/AUD?
The CEO requires a forecast of the two-year and four-year exchange rates for the SGD/AUD calculated based on Purchasing Power Parity (PPP) and the International Fisher Effect (IFE).
- Calculate the two-year forward SGD/AUD exchange rate based on PPP.
- Calculate the four-year forward SGD/AUD exchange rate based on PPP.
- Calculate the two-year forward SGD/AUD exchange rate based on IFE.
- Calculate the four-year forward SGD/AUD exchange rate based on IFE.
Explain the conditions under which the forward exchange rates calculated by you will be unbiased predictors of the future spot exchange rate.