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8. Money and Foreign exchange markets in Frankfurt and NY are very efficient and reflect the following information Spot Ex rate 1-yr TB rate

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8. Money and Foreign exchange markets in Frankfurt and NY are very efficient and reflect the following information Spot Ex rate 1-yr TB rate a) $0.9000/Euro London 6.5% Unknown NY $0.9000/Euro 3.20% 2.00% Expected Inflation b) What do the financial markets suggest for inflation in Europe for the coming year? Estimate today's one-year forward exchange rate between the $ and the Euro.

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