EBK CORPORATE FINANCE
11th Edition
ISBN: 8220102798878
Author: Ross
Publisher: YUZU
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Textbook Question
Chapter 31, Problem 11QP
The International Fisher Effect You observe that the inflation rate in the United States is 1.8 percent per year and that T-bills currently yield 1.95 percent annually. What do you estimate the inflation rate to be in:
a. Australia if short-term Australian government securities yield 4 percent per year?
b. Canada if short-term Canadian government securities yield 6 percent per year?
c. Taiwan if short-term Taiwanese government securities yield 9 percent per year?
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In the United Kingdom, the inflation rate is 1.8 per cent per year and that T-bills currently yield 2.1 per cent annually. What do you estimate the inflation rate to be in Australia if short-term Australian government securities yield 4 per cent per year?
You observe that the inflation rate in the United States is 1.3 percent per year and that T-
bills currently yield 1.8 percent annually. Use the approximate international Fisher effect
to answer the following questions.
a. What do you estimate the inflation rate to be in Australia, if short-term Australian
government securities yield 8 percent per year? (Enter your answer as a percent
rounded to 1 decimal place, e.g., 32.1.)
b. What do you estimate the inflation rate to be in Canada, if short-term Canadian
government securities yield 11 percent per year? (Enter your answer as a percent
rounded to 1 decimal place, e.g., 32.1.)
c. What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese
government securities yield 13 percent per year? (Enter your answer as a percent
rounded to 1 decimal place, e.g., 32.1.)
X Answer is complete but not entirely correct.
a. Australian inflation rate
b. Canadian inflation rate
c. Taiwanese inflation rate
0.5 X %
5.5 X %
7.5 X %
Suppose the U.S. T-bills is 4.76% annually and the U.S. inflation rate is 3.52% annually. If the shor-term Australian government securities is 6.98% per year, what is the inflation rate in Australia. Please use the approximate (not exact form) international Fisher effect for this question ?
Chapter 31 Solutions
EBK CORPORATE FINANCE
Ch. 31 - Spot and Forward Rates Suppose the exchange rate...Ch. 31 - Prob. 2CQCh. 31 - Prob. 3CQCh. 31 - Prob. 4CQCh. 31 - International Risks At one point, Duracell...Ch. 31 - Multinational Corporations Given that many...Ch. 31 - Prob. 7CQCh. 31 - Exchange Rate Movements Some countries encourage...Ch. 31 - Prob. 9CQCh. 31 - Exchange Rate Risk If you are an exporter who must...
Ch. 31 - International Capital Budgeting Suppose it is your...Ch. 31 - International Capital Budgeting An investment in a...Ch. 31 - International Borrowing If a U.S. firm raises...Ch. 31 - International Investment If financial markets arc...Ch. 31 - Using Exchange Rates Take a look back at Figure 3...Ch. 31 - Prob. 2QPCh. 31 - Prob. 3QPCh. 31 - Using Spot and Forward Exchange Rates Suppose the...Ch. 31 - Prob. 5QPCh. 31 - Prob. 6QPCh. 31 - Interest Rates and Arbitrage The treasurer of a...Ch. 31 - Inflation and Exchange Rates Suppose the current...Ch. 31 - Exchange Rate Risk Suppose your company imports...Ch. 31 - Prob. 10QPCh. 31 - The International Fisher Effect You observe that...Ch. 31 - Prob. 12QPCh. 31 - Prob. 13QPCh. 31 - Capital Budgeting Lakonishok Equipment has an...Ch. 31 - Capital Budgeting You are evaluating a proposed...Ch. 31 - Prob. 16QPCh. 31 - Prob. 17QPCh. 31 - Using the Exact International Fisher Effect From...Ch. 31 - Prob. 1MCCh. 31 - What will happen to the companys profits if the...Ch. 31 - Ignoring taxes, what are East Coast Yachts...Ch. 31 - How can the company hedge its exchange rate risk?...Ch. 31 - Taking all factors into account, should the...
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