1 if interest rate parity holds and the annual taiwan, Ask an Expert

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1. If interest rate parity holds and the annual Taiwan nominal interest rate is 7% and the U.S. annual nominal rate is 5% and real interest rates are 2% in both countries, then what are expected inflation rates in Taiwan and in the U.S.?

2. The exchange rate between the Australian dollar (AD) and the U.S. dollar (USD) was 2.2 AD per USD at the beginning of 2015. Over the year, Australia’s inflation was 12% and the U.S. inflation was 4%. What should be the exchange rate at the end of 2015, if purchasing power parity holds?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93048970

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