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Assume the interest rate in Britain is 7%, the interest rate in Canada is 4%, Rt=3, and Rt+1=3.3. Calculate the return in Canadian $ of
Assume the interest rate in Britain is 7%, the interest rate in Canada is 4%, Rt=3, and Rt+1=3.3. Calculate the return in Canadian $ of investing in Britain for 1 year. In addition, show whether the interest rate parity condition holds. Finally, what will be the effects on the balance of payments and the exchange rate?
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Macroeconomics Canada in the Global Environment
Authors: Michael Parkin, Robin Bade
8th edition
321778103, 978-0321808370, 321808371, 978-0321778109
