Question
Assume the market thinks there is a 40% probability of devaluation of 5% within the next month. How much must the annual interest rate increase
Assume the market thinks there is a 40% probability of devaluation of 5% within the next month. How much must the annual interest rate increase to defend the fixed exchange rate? What if the probability of 5% devaluation within the next month increases to 80%?
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Ro
7th Canadian Edition
007090653X, 978-0070906532, 978-0071339575
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