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Compute the interest rate in the us

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The current MXN/USD is 0.04 and the future USD/MXN rate is expected to be 1 USD=26 MEX. The interest rate is 4% in Mexico.

a) Based on the iFE, which of the two countries should have a higher interest rate? Why?

b) Using the exact formula for IFE, compute the interest rate in the US.

IFE= International Fisher Effect

Reference no: EM132494831

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