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Please answer the following problem and submit the solution in a word document Due to the integrated nature of their capital markets, investors in both
Please answer the following problem and submit the solution in a word document Due to the integrated nature of their capital markets, investors in both US and UK require the same real interest rate, 25 percent on their lending. There is a consensus in capital markets that the annual inflation rate is likely to be 35 percent in the US and 15 percent in the UK for the next three years. The spot exchange rate is currently $1.50 a Compute the nominal interest rate per annum in both US and UK assuming that the Fischer offed holds b. What is your expected future spot dollar-pound exchange rate for one-year maturity c. Can you inter the forward dollar-pound exchange rate for one-year maturity
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