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Assume Two Countries,A and B Have the Following Fisher Equations,where

Question 20

Multiple Choice

Assume two countries,A and B have the following Fisher equations,where i is nominal interest rate,r is real interest rate,and π is the expected rate of inflation:
iA = rA + πA
iB = rB + πB
Spot and forward rates are expressed as currency A per currency B.When the covered interest parity holds and rA = rB, then


A) Assume two countries,A and B have the following Fisher equations,where i is nominal interest rate,r is real interest rate,and π is the expected rate of inflation: i<sub>A</sub> = r<sub>A</sub> + π<sub>A</sub> i<sub>B</sub> = r<sub>B</sub> + π<sub>B</sub> Spot and forward rates are expressed as currency A per currency B.When the covered interest parity holds and r<sub>A</sub> = r<sub>B</sub>, then A) B) C) D)
B) Assume two countries,A and B have the following Fisher equations,where i is nominal interest rate,r is real interest rate,and π is the expected rate of inflation: i<sub>A</sub> = r<sub>A</sub> + π<sub>A</sub> i<sub>B</sub> = r<sub>B</sub> + π<sub>B</sub> Spot and forward rates are expressed as currency A per currency B.When the covered interest parity holds and r<sub>A</sub> = r<sub>B</sub>, then A) B) C) D)
C) Assume two countries,A and B have the following Fisher equations,where i is nominal interest rate,r is real interest rate,and π is the expected rate of inflation: i<sub>A</sub> = r<sub>A</sub> + π<sub>A</sub> i<sub>B</sub> = r<sub>B</sub> + π<sub>B</sub> Spot and forward rates are expressed as currency A per currency B.When the covered interest parity holds and r<sub>A</sub> = r<sub>B</sub>, then A) B) C) D)
D) Assume two countries,A and B have the following Fisher equations,where i is nominal interest rate,r is real interest rate,and π is the expected rate of inflation: i<sub>A</sub> = r<sub>A</sub> + π<sub>A</sub> i<sub>B</sub> = r<sub>B</sub> + π<sub>B</sub> Spot and forward rates are expressed as currency A per currency B.When the covered interest parity holds and r<sub>A</sub> = r<sub>B</sub>, then A) B) C) D)

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