The nominal (quoted) U.S. one-year interest rate is 6%, while the nominal one-year interest rate in Canada is 5%. Assume you believe in purchasing power parity. You believe the real one-year interest rate is 2% in the U.S, and that the real one-year interest rate is 3% in Canada. Today the Canadian dollar spot rate at $.90. What do you think the spot rate of the Canadian dollar will be in one year? The nominal quoted U S one year interest rate is 6 while

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.