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Due to the integrated nature of their capital markets, Investors in both the United States...

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Finance

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Due to the integrated nature of their capital markets, Investors in both the United States and the UK require the same real interest rate, 3.9 percent, on their lending. There is a consensus in capital markets that the annual inflation rate is likely to be 49 percent in the United States and 2.9 percent in the UK, for the next three years. The spot exchange rate is currently $2.9/6. a. Compute the nominal Interest rate per annum in both the United States and the UK, assuming that the Fisher effect hold. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Nominal rate in U.S. Nominal rate in UK b. What is your expected future spor doltorpound exchange rate in three years from now? (Do not round Intermediate calculations Round your answer to 4 decimal places.) Expected future spot rate c. Can you infer the forward dollar pound exchange rate for one year maturity? (Do not round Intermediate calculations. Round your answer to 4 decimal places.) Expected Future spot rate

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