Let the Expected Inflation in the United Sates Be 4

question 51

Multiple Choice

Let the expected inflation in the United Sates be 4% and the expected inflation in Europe is 2.3 %; Also suppose that the United States one-year,risk-free rate is 5% what must the risk-free rate in Europe be to maintain interest rate parity?

• A) 3.28%
• B) 2.42%
• C) 5.12%
• D) 7.30%

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Definitions:

Dichlorophenol

A chemical compound consisting of a phenol molecule with two chlorine atoms attached, used in the manufacture of pesticides and disinfectants.

M-xylene

A type of xylene where two methyl groups are attached to a benzene ring in meta positions to each other.

Structure

The arrangement of atoms within a molecule, determining the molecule's shape and chemical behavior.

P-aminobenzoic Acid

A white crystalline substance that is a part of the vitamin B complex and is used in sunscreen products.