Question: Question 12 Below is some financial data between the United States and Brazil. United States Brazil 1-Year Treasury yield 4.4% 5.4% Rate of inflation 2.0%

Question 12

Below is some financial data between the United States and Brazil.

	United States	Brazil
1-Year Treasury yield	4.4%	5.4%
Rate of inflation	2.0%	2.977%

The current spot exchange rate is 0.1828 USD per Brazilian Real (BRL). The 1-year forward exchange rate is 0.1853 USD per BRL.

Assume that absolute purchasing power parity holds. Product A currently costs 10,000 BRL. Calculate what the identical Product A should cost in the United States. Use 4 decimals for the exchange rate.

Question 13

Based on information provided above (question 12), determine if interest rate parity between the two countries is holding. Calculations required. Briefly explain. Use 4 decimals.

Question 14

Refer to question 12 above. The Treasurer of Lothbrok Industries has 10 million USD to invest for one year. He is tempted by the higher rate of interest in the foreign country. Is investing in a one year risk-free foreign government Treasury bill the best option for the Treasurer? No calculations are required. Briefly explain your answer.

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