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5). Write the answers to following questions legibly and briefly. (Total 8 points) a)- If the exchange rate between Canadian Dollar and Euro is $1.4894/,
5). Write the answers to following questions legibly and briefly. (Total 8 points) a)- If the exchange rate between Canadian Dollar and Euro is $1.4894/, expected exchange rate is $1.44, European interest rate is 3%, European GDP deflator is 400, and Canadian GDP deflator is 300. Calculate the expected depreciation rate, expected rate of return on foreign assets, and real exchange rate. (2) b)- Derive the uncovered interest parity condition. Show the details of your work. (6) 5). Write the answers to following questions legibly and briefly. (Total 8 points) a)- If the exchange rate between Canadian Dollar and Euro is $1.4894/, expected exchange rate is $1.44, European interest rate is 3%, European GDP deflator is 400, and Canadian GDP deflator is 300. Calculate the expected depreciation rate, expected rate of return on foreign assets, and real exchange rate. (2) b)- Derive the uncovered interest parity condition. Show the details of your work. (6)
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