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Suppose the spot rate of the British pound is $1.40/ while the expected $/ exchange rate is $1.36/. Also, assume the British interest rate is
Suppose the spot rate of the British pound is $1.40/ while the expected $/ exchange rate is $1.36/. Also, assume the British interest rate is 5% while the dollar interest rate is 1.50%. If you had $400,000 to invest, where would you invest it? Briefly explain. How much would you expect to make in a year? Other things remaining the same, at what expected exchange rate, according to the interest parity theory, will the two capital markets come to equilibrium
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