Suppose that the current exchange rate is €1.57 =£1, but it is expected to be €1.45 =£1 in one year. If the curent interest rate on a one-year govemment bond in the United Kingdom is 10%, what does the interest-rate parity condition indicate the interest rate will be on a one-year government bond in Germany? Assume that there are no differences in risk, liquidity, taxation, or information costs between the bonds The German interest rate will be % (Round your response to two decimal places)

Suppose that the current exchange rate is €1.57 =£1, but it is expected to be €1.45 =£1 in one year. If the curent interest rate on a one-year govemment bond in the United Kingdom is 10%, what does the interest-rate parity condition indicate the interest rate will be on a one-year government bond in Germany? Assume that there are no differences in risk, liquidity, taxation, or information costs between the bonds The German interest rate will be % (Round your response to two decimal places)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter6: Managing In The Global Economy

Section: Chapter Questions

Problem 12E

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