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D. a) If the interest rates are .07 and .05 in Argentina and Canada respectively, what will happen to the peso versus the Canadian dollar,

D. a) If the interest rates are .07 and .05 in Argentina and Canada respectively, what will happen to the peso versus the Canadian dollar, if presently they exchange as 10 pesos for one dollar? Derive the future/expected ER, if IFE holds true.

b) Explain the concept of IFE with the aforementioned problem. Explain the concept of IFE in this case.

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