Hello,

I am currently having trouble with this question on my homework:

Assume that the U.S. one-year interest rate is 3% and the one-year interest rate on Australian dollars is 6.4%. The U.S. expected annual inflation is 5%, while the Australian inflation is expected to be 8%. You have $100,000 to invest for one year and you believe that PPP holds. The spot exchange rate of an Australian dollar is $0.689. What will be the yield on your investment if you invest in the Australian market?

Help would be appreciated!!

Thanks.