1. If the expected inflation rate is 2% and the real required return is 5%,...
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1. If the expected inflation rate is 2% and the real required return is 5%, then according to the Fisher Effect, what should be the nominal interest rate?
2. The inflation rates in the U.S. and UK are expected to be 3% per annum and 5% per annum, respectively. If the current spot rate is 1=$1.3520, then according to the PPP, what should be the expected spot rate in two years?
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