You own property in Italy which is a member of the European Monetary System. The property is worth 570 million Euro today M a y 1 0 , 2023. The property generates annual rents of 85 million Euros with the next annual payment is due on or about May 10, 2024. However, you got married to Dr. "LILA" who is an expert in the Foreign Exchange Markets, and she/he STIPULATES and advises you to sell this property today and repatriate the proceeds to Oakland, California within one year period. Assume that the interest rate parity holds, that investors are risk neutral and that the real interest rate is the same in either country. You have the following information. 1. The Current SPOT Exchange rate is: 1 Euro = 1.09$. 2. The Current and Future Italian Inflation Rate is 8%. 3. The Rate of your property appreciates is a=36% and Rent Income is IR=45M. 4. The Current and Future U.S. Inflation Rate is 7%. 5. The one-year Italian Nominal Interest rate is 11%. a. Suppose that you sell the property today and repatriate the (Euro) proceeds today, then investing the $ receipts in the U.S. interest rate. What are the interest proceeds, and your dollar wealth would be on or about May 10, 2023 (t=0)? b. Suppose that you sell the property exactly on M a y 10, 2024 (t=1). What would your $ wealth be? c. What the OPPORTUNITY COST or Translation Gain would be? d. What the real interest rates would be for both countries? e. What the Forward Premium/ Forward Discount would be? f. Calculate and explain the Relative Purchasing Power Parity. g. Calculate and explain the Fisher Effect. h. Calculate and explain the International Fisherian Equation? Explain your answers analytically

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a If you sell the property today and repatriate the Euro proceeds investing the receipts in the US interest rate your dollar wealth on May 10 2023 t0 ... View the full answer