Question: 1 8 . Suppose that the one - year interest rate is 4 . 0 percent in Italy. The spot exchange rate is $ 1

18. Suppose that the one-year interest rate is 4.0 percent in Italy. The spot exchange rate is $1.60/E, and the one-year forward exchange rate is $1.58/. What must the one-year interest rate be in the United States to avoid arbitrage opportunities?
A.2.00%
B.2.70%
C.5.32%
D. none of the options in this question

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