Question: 2. Problem 2 (5 points) Suppose the real interest rate in Taiwan is 0.5% and forecast Taiwanese inflation is 1.5%. At the same time, US

2. Problem 2 (5 points) Suppose the real interest rate in

2. Problem 2 (5 points) Suppose the real interest rate in Taiwan is 0.5% and forecast Taiwanese inflation is 1.5%. At the same time, US real interest rate is 1% and forecast US inflation is 2%. a. Based on these figures, what were the nominal interest rates in Taiwan and US? (2 points) b. If the 10-day forward rate is US$ 0.5/T$ and the current spot rate is US$0.48/T$, is there arbitrage opportunity (in other words, does the interest rate parity hold)? [Hint: use the quick method; home is the US] (3 points) Trostor

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