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(Interest rate parity) Suppose 90-day investments in Europe have an annualized return of 8 percent and a quarterly (90-day) return of 2 percent. In the
(Interest rate parity) Suppose 90-day investments in Europe have an annualized return of 8 percent and a quarterly (90-day) return of 2 percent. In the United States, 90-day investments of similar risk have an annualized return of 11 percent and a quarterly return of 2.75 percent. In today's 90-day forward market, 1 euro equals $1.36. If interest rate parity holds, what is the spot exchange rate ($/euro)? If interest rate parity holds, the spot exchange rate is ($/euro). (Round to four decimal places.)
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