Suppose that the South African interest rate is 4% and the U.S. interest rate is 6%. If the expected future spot exchange rate one year from now is 6.05 Rand per US dollar and uncovered interest rate parity holds, what must the current spot exchange rate (number of Rands per Dollar) be in order to clear the foreign exchange market?

Brief Principles of Macroeconomics (MindTap Course List)
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ISBN:9781337091985
Author:N. Gregory Mankiw
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Chapter13: Open-economy Macroeconomics: Basic Concepts
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4. Suppose that the South African interest rate is 4% and the U.S. interest rate is 6%. If the
expected future spot exchange rate one year from now is 6.05 Rand per US dollar and
uncovered interest rate parity holds, what must the current spot exchange rate (number of
Rands per Dollar) be in order to clear the foreign exchange market?
Transcribed Image Text:4. Suppose that the South African interest rate is 4% and the U.S. interest rate is 6%. If the expected future spot exchange rate one year from now is 6.05 Rand per US dollar and uncovered interest rate parity holds, what must the current spot exchange rate (number of Rands per Dollar) be in order to clear the foreign exchange market?
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