b

2. Uncovered interest rate parity. You are given the following data: i = 3%, i* = 1%, Se = 1.4 ($ per ). a) Write down the general uncovered interest rate parity equilibrium relationship in its exact form. b) Write down the general uncovered interest rate parity equilibrium relationship in its approximate form. c) 1 Write down the general expression for the equilibrium spot rate. d) Calculate the equilibrium spot rate given the above data. d) Assume now that the US imposes a 10% tax rate on the domestic interest rate earned. 1) Rewrite the uncovered IRP in (a) above to incorporate the imposition of this tax. ii) Calculate the market clearing spot rate after the imposition of the tax. 2. Uncovered interest rate parity. You are given the following data: i = 3%, i* = 1%, Se = 1.4 ($ per ). a) Write down the general uncovered interest rate parity equilibrium relationship in its exact form. b) Write down the general uncovered interest rate parity equilibrium relationship in its approximate form. c) 1 Write down the general expression for the equilibrium spot rate. d) Calculate the equilibrium spot rate given the above data. d) Assume now that the US imposes a 10% tax rate on the domestic interest rate earned. 1) Rewrite the uncovered IRP in (a) above to incorporate the imposition of this tax. ii) Calculate the market clearing spot rate after the imposition of the tax