Business, 17.04.2020 17:10 wfz

Due to the integrated nature of their capital markets, investors in both the U. S. and U. K. require the same real interest rate, 2.5%, on their lending. There is a consensus in the capital markets that the annual inflation rate is likely to be 3.5% in the U. S. and 1.5% in the U. K. in each of the next three years. The spot exchange rate is currently $1.50/£. Using the International Fisher Effect, what is your expected future spot dollar-pound exchange rate in three years from now?
a. $1.6154/₤
b. $1.5904/₤
c. $1.5597/₤
d. $1.5785/₤

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Due to the integrated nature of their capital markets, investors in both the U. S. and U. K. require...

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