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Question 15 1 pts Assume that the Law of One Price holds. Furthermore, imagine that there are two countries A and B. In the first
Question 15 1 pts Assume that the Law of One Price holds. Furthermore, imagine that there are two countries A and B. In the first country - A- the interest rate is equal to 1% in the second - B - to 4%. At time t the value of the nominal exchange rate is equal to 1 unit of currency of country B per unit of currency of country A. Assume perfect capital mobility. Furthermore, assume that investors are fully rational and forward looking. Moreover, imagine that 50% of investors are risk averse and 50% are risk neutral. Risk averse investors demand a premium of 1% for investing in country B. What is the value of the real exchange rate at time t+1? 01 O 1.02 1.01 1.03 Question 15 1 pts Assume that the Law of One Price holds. Furthermore, imagine that there are two countries A and B. In the first country - A- the interest rate is equal to 1% in the second - B - to 4%. At time t the value of the nominal exchange rate is equal to 1 unit of currency of country B per unit of currency of country A. Assume perfect capital mobility. Furthermore, assume that investors are fully rational and forward looking. Moreover, imagine that 50% of investors are risk averse and 50% are risk neutral. Risk averse investors demand a premium of 1% for investing in country B. What is the value of the real exchange rate at time t+1? 01 O 1.02 1.01 1.03
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