The United States and the country of Rueland have the same real interest rate of 3 percent.
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The United States and the country of Rueland have the same real interest rate of 3 percent.
The expected inflation over the next year is 6 percent in the United States versus 21 percent in Rueland. Interest rate parity exists. The 1-year currency futures contract on Rueland’s currency (called the ru) is priced at $.40 per ru. What is the spot rate of the ru?
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