you observe the following current rates: Spot exchange rate: $0.0009/KRW Annual interest rate on 30-day U.S dollor-denominated bond:4%  Annual interest rate on 30-day KRW denominated bond: 4% a. If uncovered interest parity hold, what spot exchange rate do investors expect to exist in 30 days? explain (5%) b. Because of the Proclamation of the Panmunjom, investors expect the exchange rate to be $0.0010/KRW in 30 days/what will happen in the foreign exchange market? explain.(7%)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 12E
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you observe the following current rates: Spot exchange rate: $0.0009/KRW Annual interest rate on 30-day U.S dollor-denominated bond:4%  Annual interest rate on 30-day KRW denominated bond: 4%

a. If uncovered interest parity hold, what spot exchange rate do investors expect to exist in 30 days? explain (5%)

b. Because of the Proclamation of the Panmunjom, investors expect the exchange rate to be $0.0010/KRW in 30 days/what will happen in the foreign exchange market? explain.(7%)

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