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  3. 1. if the interest rate in the us is 5% and the in

1. If the interest rate in the US is 5% and the interest rate in...

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Finance

1. If the interest rate in the US is 5% and the interest rate in Europe is 7% and there is a 3% forward premium on the dollar, then __________ is the country into which capital will flow.

2. In the previous question the US interest rate will _____(rise/fall)

3. In the first question the forward premium on the $ will _____(rise/fall)

4. If the inflation rate in the US is 4% and the inflation rate in Europe is 7% and the forward rate on the dollar is at a 3% premium, then in this situation, relative purchasing power parity _________ does/does not) hold using the approximation formula.

5. The random walk is s good predictor of future FX rates statistically. T or F

6. The random walk is a good predictor of FX rates far out into the future T or F

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