Chapter 9 SBD Answers

Chapter 9 SBD Answers - Chapter 9 Small Business Dilemma...

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Chapter 9: Small Business Dilemma Exchange Rate Forecasting by the Sports Exports Company The Sports Exports Company converts British pounds into dollars every month. The prevailing spot rate is about $1.65, but there is much uncertainty about the future value of the pound. Jim Logan, owner of the Sports Exports Company, expects that British inflation will rise substantially in the future. In previous years when British inflation was high, the pound depreciated. The prevailing British interest rate is slightly higher than the prevailing U.S. interest rate. The pound has risen slightly over each of the last several months. Jim wants to forecast the value of the pound for each of the next 20 months. 1. Explain how Jim could use technical forecasting to forecast the future value of the pound. Based on the information provided, do you think that a technical forecast of the pound would reflect future appreciation or depreciation in the pound?
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