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Assume that you are a foreign exchange trader in the US, and that interest rate parity holds. Fill in the blanks below. Hint: use the
Assume that you are a foreign exchange trader in the US, and that interest rate parity holds. Fill in the blanks below. Hint: use the formula for the interest parity condition presented in Ch. 3. Important: Round off your answers to two decimal places (e.g. 0.02, 1.00, etc.) Failure to round off correctly may result in Canvas marking your answer wrong.
Case | Today's Dollar/EuroExchange Rate (E$/) | ExpectedDollar/EuroExchange Rate (Ee$/) | Interest Rate on EuroDeposits(R ) | Interest Rate on US Deposits (R$) |
A | 1.00 | 1.10 | 0.05 | |
B | 1.00 | 0.07 | 0.07 | |
C | 0.80 | 0.88 | 0.13 | |
D | 1.20 | 0.01 | 0.21 | |
E | 1.50 | 1.35 | 0.11 | |
F | 0.90 | 0.94 | 0.06 | |
G | 0.50 | 0.02 | 0.12 | |
H | 1.00 | 1.02 | -0.01 |
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