Suppose that U.S. 1-year bond has a yield of 1.520%, while one. From China has a yield of 2.165%. Meanwhile, over the past year, the U.S. has seen inflation of 7.9% while China has had 9.1% inflation.

Required:

Give two possible explationations for this seeming violation of real interest rate parity.

Answer rating: 100% (QA)

Real interest rate parity is a concept that suggests that the difference in real interest rates betw... View the full answer