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4 Interest Parity 2!] points Suppose investors can choose any eountry in which to invest and that every investor in a particular country earns the
4 Interest Parity 2!] points Suppose investors can choose any eountry in which to invest and that every investor in a particular country earns the same interest rate on investment. Consider the cme of an investor deciding between putting money in the USA or India {currency is called rupee1 its symbol is 1'}. a} [8 points} If the spot exchange rate is . interest in the USA is at an annual rate of $=4%? interest in India is ir=%, then would you expect the forward rate one year from new to he more or fewer rupees per dollar? \"my? h} [5 points} How many rupees would you expect a dollar to be worth on the spot market in one year from now? c} [7 points] What muld a prot seeking arhitrager do if the actual 12-month forward rate was $.ll
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