Does the Interest Rate Parity Hold in Each of the Following

question 63

Essay

Does the interest rate parity hold in each of the following cases? In case it does not hold, calculate the risk premium.
N. R_t = 8, = 3, E_t = 5, = 7
O. R_t = 7, = 4, E_t = 6, = 8
P. R_t = 6, = 5, E_t = 5, = 7
Q. R_t = 5, = 4, E_t = 6, = 8
R. R_t = 8, = 6, E_t = 5, = 7
S. R_t = 7, = 5, E_t = 6, = 8
T. R_t = 6, = 4, E_t = 5, = 7
U. R_t = 5, = 3, E_t = 6, = 8
V. R_t = 8, = 5, E_t = 6, = 8
W. R_t = 7, = 3, E_t = 8, = 9
X. R_t = 6, = 7, E_t = 7, = 8
Y. R_t = 5, = 6, E_t = 5, = 9
Z. R_t = 4, = 3, E_t = 5, = 10

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Definitions:

Industrially Advanced

Pertains to countries or regions with highly developed industries, including large manufacturing and technology sectors, contributing to strong economic growth.

Trade Barriers

Measures implemented by countries to restrict or control international trade, such as tariffs or quotas.

Per Capita

A statistical measure that divides an aggregate by the number of units in the population, used to give a sense of the average per person.

Income Gap

The economic disparity between individuals or groups in terms of income distribution within a population.