Assume that interest rate parity holds. The U.S. one-year interest rate is 10% and the Australian one-year interest rate is 8%. What will the approximate effective yield be for an Australian citizen of a one-year deposit denominated in U.S. dollars? Assume the deposit is covered by a forward sale of dollars.
A) 10%.
B) 8%.
C) 2%.
D) cannot answer without more information
Correct Answer:
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To benefit from the low
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