Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question 3

Transcribed Image Text:Real rates. Determine the nominal rates for the three countries listed if they have the following inflation rates and the real rate the world over is 0.73%:
Canada: Inflation is 5.81%.
Switzerland: Inflation is 2.24%.
United States: Inflation is 4.29%.
According to the International Fisher effect, what is the approximate nominal rate in Canada?
% (Round to two decimal places.)
According to the International Fisher effect, what is the approximate nominal rate in Switzerland?
% (Round to two decimal places.)
According to the International Fisher effect, what is the approximate nominal rate in the United States?
% (Round to two decimal places.)
Expert Solution

Step 1
Given information :
Real rate over the world = 0.73%
Formula for international Fischer effect :
Step 2
1. Nominal rate in Canada :
Step 3
2. Nominal rate in Switzerland :
Step by step
Solved in 5 steps

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