Table 27.1 shows the 3-month forward rate on the South African rand. a. Is the dollar at a forward discount or premium on the rand? b. What is the annual percentage discount or premium? c. If you have...

a. Is the dollar at a forward discount or premium on the rand?

b. What is the annual
percentage
discount or premium?

c. If you have no other information about the two currencies, what is your best guess about

the spot rate on the rand three months hence?

d. Suppose that you expect to receive 100,000 rand in three months. How many dollars is

this likely to be worth?

B.Define each of the following theories in a sentence or simple equation:

a. Interest rate parity.

b. Expectations theory of forward rates.

c. Purchasing power parity.

d. International capital market equilibrium (relationship of real and nominal interest rates in

different countries).