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Question: Suppose that the one-year interest rate is 3.89% in Italy, the spot exchange rate is $1.5821/1.00, and the one-year forward exchange rate is $1.6294/1.00.

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Suppose that the one-year interest rate is 3.89% in Italy, the spot exchange rate is $1.5821/1.00, and the one-year forward exchange rate is $1.6294/1.00. Based on interest rate parity, what must the one-year interest rate be in the United States?

Please proper explain and do not copy from Chegg. otherwise I have to report the answer.

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