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Suppose spot rate is $/ = $1.25/ and the 1-year forward rate is F1$/ = $1.20/. The real interest rate on a risk-free government security

Suppose spot rate is $/ = $1.25/ and the 1-year forward rate is F1$/ = $1.20/. The real interest rate on a risk-free government security is 2 percent in both the United Kingdom and the United States. The U.S. ination rate is 5 percent.

a. What is the U.K.s ination rate if the equilibrium relationships hold

b.What is the U.K's nominal required return on risk-free government securities?

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