Expected Real Rates of Interest for Five CountriesCountryNominal InterestInflation RateExpected RealRate of InterestRateForecastAustralia4.5%3.1%Japan0.1%1%Brazil4.6%6.15%South Africa6.5%4.2%United States1.2%- 0.95%Source: Trading Economics, September, 2010Table 12.1Refer to Table 12.1. Assuming the inflation rate forecast to be accurate, which nation would pay the highest nominal rate of return?O A. AustraliaO B. South AfricaO C. the United StatesO D. BrazilClick to select your answer.

Interest refers to the amount charged by the lender on the lent amount. The borrower of the loan is…

Answered: Table 12.1 ofer to Table 12.1. Assuming…

Table 12.1 ofer to Table 12.1. Assuming the inflation rate forecast to be accurate, which nation would pay the highest nominal rate of return?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 1IEE

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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

Question

Expected Real Rates of Interest for Five Countries
Country
Nominal Interest
Inflation Rate
Expected Real
Rate of Interest
Rate
Forecast
Australia
4.5%
3.1%
Japan
0.1%
1%
Brazil
4.6%
6.15%
South Africa
6.5%
4.2%
United States
1.2%
- 0.95%
Source: Trading Economics, September, 2010
Table 12.1
Refer to Table 12.1. Assuming the inflation rate forecast to be accurate, which nation would pay the highest nominal rate of return?
O A. Australia
O B. South Africa
O C. the United States
O D. Brazil
Click to select your answer.

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