Assume the following information:

U.S. investors have $1,000,000 to invest

1-year deposit rate offered by U.S. banks = 12%

1-year deposit rate offered on Swiss francs = 10%

1-year forward rate of Swiss francs = $.62

Spot rate of Swiss franc = $.60

Given this information:

Group of answer choices

interest rate parity exists and covered interest arbitrage by U.S. investors results in a yield above what is possible domestically.

interest rate parity doesnt exist and covered interest arbitrage by U.S. investors results in a yield above what is possible domestically.

interest rate parity exists and covered interest arbitrage by U.S. investors results in the same yield as investing domestically.

interest rate parity doesnt exist and covered interest arbitrage by U.S. investors results in a yield below what is possible domestically.

Assume a twocountry world: Country A and Country B. Which of the following is correct about purchasing power parity (PPP) as related to these two countries?

Group of answer choices

If Country As inflation rate exceeds Country Bs inflation rate, Country As currency will weaken.

If Country Bs inflation rate exceeds Country As inflation rate, Country As currency will weaken.

If Country As interest rate exceeds Country Bs inflation rate, Country As currency will weaken.

If Country As interest rate exceeds Country Bs inflation rate, Country As currency will strengthen.