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Homework answers / question archive / 1 8,00 üzerinden i?aretlenmi? P Soruyu i?aretle The price of a Big Mac in the U

1 8,00 üzerinden i?aretlenmi? P Soruyu i?aretle The price of a Big Mac in the U

Finance

1 8,00 üzerinden i?aretlenmi? P Soruyu i?aretle The price of a Big Mac in the U.S. is $5.89 and the price in Turkey is 29 Turkish Lira (TRY). What is the implied PPP of the TRY per dollar? Lütfen birini seçin: a. 4.92 TRY/$ O b. 4.84 TRY/$ c. 4.17 TRY/$ d. 5.01 TRY/$

2 Soruyu i?aretle Assume the current U.S. dollar-TRY spot rate is 6,30TRY/$. Further, the current nominal 180-day rate of return in Turkey is annually 8% and 2% in the United States. What is the approximate forward exchange rate for 180 days? (Assuming TRY is home currency) Lütfen birini seçin: a. 6.68 TRY/$ b. 6.12 TRY/$ c. 6.67 TRY/$ d. 6.49 TRY/$

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1 Answer: a. 4.92 TRY / $

Implied PPP of the TRY per dollar = 29 TRY / $ 5.89 = 4.92 TRY / $

2 Fwd rate :

Acc to Interest rate parity theorm,

Fwd rate = Spot rate * [ (1+Hi) / ( 1 + Fi) ]

Hi = Int rate Turkey
Fi = Int rate US

Fwd rate = 6.3 * [ (1+(0.08*6/12)) / ( 1 + (0.02*6/12) ]

= 6.3 * [ (1+0.04) / ( 1 + 0.01 ]

= 6.3* 1.04 / 1.01

= 6.3 * 1.0297

= 6.487 i.e., 6.49

Option 4 has to be selected

Note :

Interest rates are for 1 year, so interest rates are calculated for 180 days.

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