You observe that the inflation rate in the USA is 2 percent per year and that T-bills curently yeild 2.5 percent annually. Use the approximate international fisher effect equation in your calculations.
a. What do you estimate the inflation rate to be in Austraila, if short-term Austrailian government securities yeild 5 percent per year? Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place e.g. 32.1.
b. What do you estimate the inflation rate to be in Canada, if short-term canadian government securities yeild 8 percent per year? Do not round intermediate calculations as mentioned above.
C. What do you estimate the inflation rate to be in Taiwaan , if short-term government securities yeild 10 percent per year?
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- Yogesharrow_forwardDue to high uncertainty in markets, the only quotes that are available for interest rates are 1-month quotes, that is, interest rates for one-month horizons. The monthly interest rates in the USA and Britain are, respectively, 1% and 1.5%. You seek to purchase the British Pound one-year, that is, 12-month forward. Given that the spot rate for the British Pound today is, $1.48 per pound, assuming satisfaction of Interest Rate Parity, what do you expect the forward quote for the delivery, in one year, of British Pounds to be?arrow_forwardExpected inflation in Argentina for next year is 64%. Expected inflation in Europe, for the same period, is 7.0%. Spot rate today is EUR/ARS=158.70. Using PPP, can you estimate the future spot rate in a year from now? (additional information: 1g of gold today=EUR54.94)arrow_forward
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