Does interest rate parity hold between Brazil and the United States? If in-terest rate parity does hold,
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Does interest rate parity hold between Brazil and the United States? If in-terest rate parity does hold, what is the expected rate of appreciation or depreciation of the Brazilian real against the U.S. dollar? If the Fed raised the interest rate while the Brazilian interest rate remained at 14.25 percent a year, how would the expected appreciation or depreciation of the real change?
In August 2013, the exchange rate between the U.S. dollar and the Brazilian real was 3.125 real per dollar. In the same month, the price of a Big Max was 23 real in Sao Paulo and $3.99 in New York. Brazil’s interest rate was 14.25 percent per year and the U.S. interest rate was 1 percent per year.
Exchange RateThe value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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