459hw02

459hw02 - currency i i ln(ln 1 s f T difference Swiss Franc...

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Brigham Young University Department of Economics Economics 459 - International Finance Homework #2 Due 1/25 Name: Interest Rate Parity Using the data from the handout, which contains information reported by the Financial Times , test the covered interest rate parity hypothesis for the countries/currencies listed. Treat the UK as the home country. Test the covered interest rate parity condition by calculating the annualized forward premium using the following approximation: ) ln (ln 1 * s f i i T 1-month forward currency * i i ) ln (ln 1 s f T difference Swiss Franc Euro Japanese Yen US Dollar 3-months forward currency * i i ) ln (ln 1 s f T difference Swiss Franc Euro Japanese Yen US Dollar 1-year forward
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Unformatted text preview: currency * i i ) ln (ln 1 s f T difference Swiss Franc Euro Japanese Yen US Dollar Also test it using the exact formula: T s f i i 1 * 1 1 1-month forward currency * 1 1 i i T s f 1 difference Swiss Franc Euro Japanese Yen US Dollar 3-months forward currency * 1 1 i i T s f 1 difference Swiss Franc Euro Japanese Yen US Dollar 1-year forward currency * 1 1 i i T s f 1 difference Swiss Franc Euro Japanese Yen US Dollar Does covered interest parity hold? Why might it not hold exactly using the data we have collected?...
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This note was uploaded on 02/29/2012 for the course ECON 459 taught by Professor Phillips,k during the Winter '08 term at BYU.

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459hw02 - currency i i ln(ln 1 s f T difference Swiss Franc...

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