You observe the following exchange rates in the newspaper: Country/currency In US$ Per US$ Europe euro 1.25
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Question:
You observe the following exchange rates in the newspaper:
| Country/currency | In US$ | Per US$ |
|---|---|---|
| Europe euro | 1.25 | 0.8 |
| 1-month forward | 1.254 | 0.798 |
| Japan Yen | 0.0084 | 119 |
| 1-month forward | 0.00836 | 119.6 |
| UK pound | 1.52 | 0.658 |
| 1-month forward | 1.526 | 0.655 |
The 1-month risk-free rate is 0.75% in the US?
If interest rate parity holds, what should be the risk-free rate in Europe?
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