The nominal (quoted) U.S. one-year interest rate is 6%, whereas the nominal one-year interest rate in Canada

Question:

The nominal (quoted) U.S. one-year interest rate is 6%, whereas the nominal one-year interest rate in Canada is 5%. Assume you believe in purchasing power parity. You believe the real one-year interest rate is 2% in the U.S, and that the real one-year interest rate is 3% in Canada. Today the Canadian dollar spot rate at $.90. What do you think the spot rate of the Canadian dollar will be in one year?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: