A) Mr. Logan expects that British inflation will rise substantially in the future. In previous years...

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Finance

A) Mr. Logan expects that British inflation will risesubstantially in the future. In previous years when the Britishinflation was high, the pound depreciated. The prevailing Britishinterest rate is slightly higher than the prevailing U.S. interestrate. The pound has risen slightly over each of the last severalmonths. Mr. Logan wants you to forecast the value of the pound foreach of the next 20 months. You explain to him that this willresult in an additional fee, but that your firm will explain howthe extra service would work?
1. Explain how you can use technical forecasting to forecast thefuture value of the pound. Based on the information provided, doyou think that a technical forecast will predict futureappreciation or depreciation in the pound?
2. Explain how you can use fundamental forecasting to forecastthe future value of the pound. Based on the information provided,do you think that a technical forecast will predict futureappreciation or depreciation in the pound?
3. Explain how you can use market-based forecasting to forecastthe future value of the pound. Based on the information provided,do you think that a technical forecast will predict futureappreciation or depreciation in the pound?
4. Does it appear that all of the forecasting techniques willlead to the same forecast of the pound’s future value? Whichtechnique would you prefer to use in this situation?

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4.3 Ratings (606 Votes)

1 Due to high inflation The price of exported goods increases in international market such that the demand for them decreases as general public will prefer to consume relatively cheaper goods in comparison to them Government will increase the interest rate in order to attract the foreign investment such that the domestic currency exchange rate will increase due to high demand of See Answer

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A) Mr. Logan expects that British inflation will risesubstantially in the future. In previous years when the Britishinflation was high, the pound depreciated. The prevailing Britishinterest rate is slightly higher than the prevailing U.S. interestrate. The pound has risen slightly over each of the last severalmonths. Mr. Logan wants you to forecast the value of the pound foreach of the next 20 months. You explain to him that this willresult in an additional fee, but that your firm will explain howthe extra service would work?1. Explain how you can use technical forecasting to forecast thefuture value of the pound. Based on the information provided, doyou think that a technical forecast will predict futureappreciation or depreciation in the pound?2. Explain how you can use fundamental forecasting to forecastthe future value of the pound. Based on the information provided,do you think that a technical forecast will predict futureappreciation or depreciation in the pound?3. Explain how you can use market-based forecasting to forecastthe future value of the pound. Based on the information provided,do you think that a technical forecast will predict futureappreciation or depreciation in the pound?4. Does it appear that all of the forecasting techniques willlead to the same forecast of the pound’s future value? Whichtechnique would you prefer to use in this situation?