Compute the nominal interest rate per annum in canada

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Reference no: EM133617005

Problem: Due to the commonality between Canadian and the United Kingdom capital markets require the same real interest, 3.0%, on their lending. There is Conesus in capital markets that the annual inflation rate is likely to be 3.5% in Canada and 2.0% in the United Kingdom for the next three years. The spot exchange rate is currently So=$2.30/£. Compute the nominal interest rate per annum in both Canada and the United Kingdom, assuming that the Fisher effect holds. Can you infer the forward dollar-pound exchange rate for one-year maturity?

Reference no: EM133617005

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