I’m lost here, not sure if it’s erratum. Schweser book 4 page 137, Question 4. The answer states: A DECREASE in the domestic interest rate would result in an INCREASED value in the domestic currency… In the chapter (LOS C): If the domestic interest rate INCREASES relative to the local rate, the futures rate also INCREASES. Generally speaking, interest rates down, currency value down, correct? Wtf is up with this answer, am I missing something here ?
readytopass Wrote: ------------------------------------------------------- > I’m lost here, not sure if it’s erratum. Schweser > book 4 page 137, Question 4. > > The answer states: A DECREASE in the domestic > interest rate would result in an INCREASED value > in the domestic currency… Increase in real int rates…ccy value increases Increase in nominal int rates …increase in inflation… ccy value decreases. > In the chapter (LOS C): If the domestic interest > rate INCREASES relative to the local rate, the > futures rate also INCREASES. assuming increase in Nominal int rate, to hold IRP, future rate (Domestic/Foreign) will increase. > Generally speaking, interest rates down, currency > value down, correct? Wtf is up with this answer, > am I missing something here ? Correct if real int rate is down.