12 years ago 12 years ago

Purchase Power Parity Illustration 8

by Score Tutorial 12 years ago12 years ago

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A dozen of apples cost Rupees 456 today, which is expected to rise to Rupees 504 after 1 year. The same dozen of apples cost 12 swiss francs today and they are expecting price of 12.60 swiss francs after one year.

(a) As per law of one price and PPP, what is CHF INR spot rate?

(b) As per law of one price and PPP, what is CHF INR 1-year forward rate?

(d) Calculate % forward margin on appreciating currency.

(Ans.: CHF INR 38, CHF INR 40, CHF is appreciating, 5.26%)

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Purchase Power Parity Illustration 8

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