Assume that the Venezuelan one-year interest rate is 90 percent while the U.S. one-year interest rate is

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Question:

Assume that the Venezuelan one-year interest rate is 90 percent while the U.S. one-year interest rate is 6 percent. Determine the break-even value for the percentage change in Venezuela’s currency (the bolivar) that would cause the effective yield to be the same for a one year deposit in Venezuela as for a one-year deposit in the United States.

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