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8. Assume the Australian dollars spot rate is US$0.70 and that the Australian and U.S. one-year interest rates are initially 5%. Then assume that the

8. Assume the Australian dollars spot rate is US$0.70 and that the Australian and U.S. one-year interest rates are initially 5%. Then assume that the Australian one-year interest rate increases by 3 percentage points, whilst the U.S. one-year interest rate remains unchanged. Using this information and the international Fisher effect theory, forecast the spot rate for one-year ahead.

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