The Chinese Yuan is currently exchanged at 1 Chinese Yuan = 0.13 Euro. The Euro trades at a 3% forward premium. The Euro area inflation is 1.5%. The nominal rate for China is 5%. a) What is the forward exchange rate for the Yuan/Euro pair? b) What is the nominal interest rate in Europe? c) What is the real interest rate in Europe?

The Chinese Yuan is currently exchanged at 1 Chinese Yuan = 0.13 Euro. The Euro trades at a 3% forward premium. The Euro area inflation is 1.5%. The nominal rate for China is 5%. a) What is the forward exchange rate for the Yuan/Euro pair? b) What is the nominal interest rate in Europe? c) What is the real interest rate in Europe?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 15QA

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