Let the expected inflation in the United Sates be 4% and the expected inflation in Costa Rica is 7.8 %; Also suppose that the United States one-year,risk-free rate is 5% what must the risk-free rate in Costa Rica be to maintain interest rate parity?
A) 8.84%
B) 8.19%
C) 5.39%
D) 12.80%
Correct Answer:
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