Page 10 - Demo

%u062c%u0645%u064a%u0639 %u0627%u0644%u062d%u0642%u0648%u0642 %u0645%u062d%u0641%u0648%u0638%u0629 %u0640 %u0627%u0625%u0644%u0639%u062a%u062f%u0627%u0621 %u0639%u0649%u0644 %u062d%u0642 %u0627%u0645%u0644%u0624%u0644%u0641 10 %u0628%u0627%u0644%u0646%u0633%u062e %u0623%u0648 %u0627%u0644%u0637%u0628%u0627%u0639%u0629 %u064a%u0639%u0631%u0636 %u0641%u0627%u0639%u0644%u0647 %u0644%u0644%u0645%u0633%u0627%u0626%u0644%u0629 %u0627%u0644%u0642%u0627%u0646%u0648%u0646%u064a%u0629If PPP holds, the change in the exchange rate is equal to the difference in the inflation rates of the two countries.e = (%uf070$ %u2013 %uf070%u20ac) %u2248 %uf070$ %u2013 %uf070%u20ac(1 + %uf070%u20ac)e: the rate of change in the exchange rate%uf070$: US. inflation rate%uf070%u20ac: Eurozone inflation rateExample:If the U.S. inflation rate is 5% and the Eurozone inflation rate is 7%, the Euro should depreciate by 1.9% or around 2%.e = (5% %u20137%) = -1.9% %u2248 5% %u2013 7%(1 + 7%)If PPP holds,(1+e) = (1+%uf070$)(1 + %uf070%u20ac)If PPP is expected to hold between the US and the Eurozone in the next year, the expected exchange rate S1($/%u20ac) in the first year can be found with PPP as follows:S ($/EGP) = S ($/EGP) (%ud835%udfcf%ud835%udfcf+%uf070$)%ud835%udc8f%ud835%udc8fn 0 (%ud835%udfcf%ud835%udfcf+%uf070%ud835%udc04%ud835%udc04%ud835%udc06%ud835%udc06%ud835%udc0f%ud835%udc0f)%ud835%udc8f%ud835%udc8fExample:Assume that the value of the EGP will not be fixed, the inflation rate in the EGP is%uf070EGP = 7%, the inflation rate in dollars is %uf070$= 4% and PPP is expected to hold between the two countries. What is the expected exchange rate of EGP after three years if the present exchange rate S0 ($/EGP) is 0.064?S ($/EGP) = S ($/EGP) (%ud835%udfcf%ud835%udfcf+%uf070$)%ud835%udfd1%ud835%udfd13 0S (%ud835%udfcf%ud835%udfcf+%ud835%udfce%ud835%udfce.%ud835%udfce%ud835%udfce%ud835%udfd2%ud835%udfd2)%ud835%udfd1%ud835%udfd1(%ud835%udfcf%ud835%udfcf+%uf070%ud835%udc04%ud835%udc04%ud835%udc06%ud835%udc06%ud835%udc0f%ud835%udc0f)%ud835%udfd1%ud835%udfd13 ($/EGP) =0.064 (%ud835%udfcf%ud835%udfcf+%ud835%udfce%ud835%udfce.%ud835%udfce%ud835%udfce%ud835%udfd5%ud835%udfd5)%ud835%udfd1%ud835%udfd1 = 0.059 $/EGP