Suppose the Euro/Dollar Exchange Rate is 1 = $1.3640, the annual US riskfree rate is 4.47%, the
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Suppose the Euro/Dollar Exchange Rate is €1 = $1.3640, the annual US riskfree rate is 4.47%, the US inflation rate is 2.69%, and the annual Eurozone riskfree rate is 4.27%. What is the one-year Forward Euro/Dollar Exchange Rate, the one-year ahead Expected Spot Euro/Dollar Exchange Rate, and Eurozone inflation rate? What is the Percent Difference in:
• the Eurozone Riskfree Rate vs. US Riskfree Rate,
• the Forward Euro/Dollar Exchange Rate vs. the Spot Rate,
• the Expected Spot Euro/Dollar Exchange Rate vs. the Spot Rate, and
• the Eurozone Inflation Rate vs. the US Inflation Rate?
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