Question: Based on the information below, determine if the interest rate parity holds (please show with calculation why it holds or why it does not hold)

  1. Based on the information below, determine if the interest rate parity holds (please show with calculation why it holds or why it does not hold)

European investor has 1 mn to invest.

1-year deposit rate in = 3%

1-year interest rate in Turkey=10%

1-year forward rate of EurTL= 8

Spot rate of EurTL=7

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