Does the Interest Rate Parity Hold in Each of the Following

question 107

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:

Account

A record that summarizes all transactions related to a particular item or entity, used in financial accounting to track financial changes.

Dividends

Payments made by a corporation to its shareholders out of its profits.

Expenses

Costs incurred in the operation of a business to generate revenue.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company’s balance sheet.