Fill in the blanks using the following words: higher, lower, UK, Netherland, stable, equalized, inverted, government, arbitrage, inflation. Consider an investor with 1,000 euros to place in a bank deposit in either the Netherlands or Great Britain. The (one-year) interest rate on bank deposits is 2% in Britain and 2.5% in the Netherlands. The (one-year) forward euro-pound exchange rate is 1.515 euros per pound and the spot rate is 1.5 euros per pound. The euro-denominated return on Dutch deposits is than that on the covered return on British deposits. This will cause investors to move their funds to the These flo will continue until the returns are This is how restores interest parity.

Fill in the blanks using the following words: higher, lower, UK, Netherland, stable, equalized, inverted, government, arbitrage, inflation. Consider an investor with 1,000 euros to place in a bank deposit in either the Netherlands or Great Britain. The (one-year) interest rate on bank deposits is 2% in Britain and 2.5% in the Netherlands. The (one-year) forward euro-pound exchange rate is 1.515 euros per pound and the spot rate is 1.5 euros per pound. The euro-denominated return on Dutch deposits is than that on the covered return on British deposits. This will cause investors to move their funds to the These flo will continue until the returns are This is how restores interest parity.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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