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assume that the one - year interest rate is 4 . 0 percent in the united states; the spot exchange rate is $ 1 .

assume that the one-year interest rate is 4.0 percent in the united states; the spot exchange rate is $1.25/euro, and the one-year forward exchange rate is $1.16/euro. what must the one-year interest rate be in the euro-zone to avoid arbitrage?

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