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Interest rate parity exists between the U.S. and France as well as the U.S. and...

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Accounting

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Interest rate parity exists between the U.S. and France as well as the U.S. and Australia. The international Fisher effect exists between the U.S. and France as well as the U.S. and Australia. Freddie (based in the U.S.) invests in a one-year CD (certificate of deposit) in Australia and sells Australian dollar one year forward to cover his position. Stella (based in Australia) invests in a one-year CD in France and does not cover her position. What are the returns on funds invested for Freddie and Stella respectively? What conclusions/comments related to IRP and/or IFE can you make from Freddie's and Stella's returns respectively? (Hint: You can get the exchange rate between euro and Australian dollar from their respective rate to USD) ANS: Please clearly label your return calculations, i.e., the investment return for Freddie and Stella respectively. Interest rate parity exists between the U.S. and France as well as the U.S. and Australia. The international Fisher effect exists between the U.S. and France as well as the U.S. and Australia. Freddie (based in the U.S.) invests in a one-year CD (certificate of deposit) in Australia and sells Australian dollar one year forward to cover his position. Stella (based in Australia) invests in a one-year CD in France and does not cover her position. What are the returns on funds invested for Freddie and Stella respectively? What conclusions/comments related to IRP and/or IFE can you make from Freddie's and Stella's returns respectively? (Hint: You can get the exchange rate between euro and Australian dollar from their respective rate to USD) ANS: Please clearly label your return calculations, i.e., the investment return for Freddie and Stella respectively

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