Assume that the following information is available as of today.
Real rate of interest required by investors 1% 1%
Nominal interest rate -- 3%
Spot rate -- ($/?)1.08
One-year forward rate -- ($/?)1.12
Find out the nominal interest rate in U.S. In your process for deriving the nominal interest rate, clearly explain which principle(s), i.e. parity, you are using.© BrainMass Inc. brainmass.com March 5, 2021, 12:15 am ad1c9bdddf
Assuming Interest Rate Parity (IRP) holds,
Forward Rate = (1 + ...
The solution finds out the nominal interest rate in the U.S.