Assume that you believe that purchasing power parity (PPP) holds. You are an Australian investor with 125,000
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Assume that you believe that purchasing power parity (PPP) holds. You are an Australian investor with 125,000 AUD to invest for the next year. The current exchange rate is AUD/USD 0.73. The expected inflation in the U.S. is 1.5% while the expected inflation in Australia is 3.5%. Current interest rates in the U.S. are 1% and in Australia 4%. What is your expected yield on a U.S. investment?
Related Book For
International Finance Theory and Policy
ISBN: 978-0133423648
10th edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
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