Predicting
Future Interest Rate
Future rate can be
predicated or calculated using the prevailing interest rate information of two
countries.
Predicting
Future Rate Example
US/Pound
= 1.5
UK
Interest Rate= 8%
US
Interest Rate= 6%
Solution
Important Factor is to determine
the first currency & second currency. Here First currency is US and Second
currency is Pound. Quoting of spot rate will give us idea about first currency
and second currency.
Forward Rate = Spot Rate x 1.50 (1.06/1.08)
= 1.47222 (Future
Rate)
