Does the Interest Rate Parity Hold in Each of the Following

question 125

Essay

Does the interest rate parity hold in each of the following cases? In case it does not hold, calculate the risk premium.
A. Rt = 5, = 3, Et = 5, = 7
B. Rt = 6, = 3, Et = 5, = 7
C. Rt = 7, = 3, Et = 5, = 7
D. Rt = 8, = 3, Et = 5, = 7
E. Rt = 5, = 4, Et = 5, = 7
F. Rt = 5, = 5, Et = 5, = 7
G. Rt = 5, = 6, Et = 5, = 7
H. Rt = 5, = 3, Et = 6, = 7
I. Rt = 5, = 3, Et = 7, = 7
J. Rt = 5, = 3, Et = 8, = 7
K. Rt = 5, = 3, Et = 5, = 8
L. Rt = 5, = 3, Et = 5, = 9
M. Rt = 5, = 3, Et = 5, = 10

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Definitions:

Analysis of Variance

A statistical method used to compare means and variances between two or more groups to determine if there are significant differences.

Factorial ANOVA

A statistical test used to examine the effects of two or more independent variables on a dependent variable, including interaction effects between them.

Interaction

In statistics, the way in which two or more variables are related to each other and the effect they have on the outcome of interest.

Simple ANOVA

A statistical method used to compare the means of three or more samples to determine if they come from the same population.