Answered: Suppose that the rate of returns on U.S…

Suppose that the rate of returns on U.S dollar is 2% and the rate of return on Japanese yen (¥) is 2.5%. Under interest parity, find the ratio of the current to the expected exchange rate (Ɛ/Ɛ)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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Suppose that the rate of returns on U.S dollar is 2% and the rate of return on
Japanese yen (¥) is 2.5%. Under interest parity, find the ratio of the current to the
expected exchange rate (E°/E)?

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