Determine the real interest rate

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Reference no: EM1375061

Assume that nominal interest rate on 3-month Treasury bills is 8 percent in the United States and 6 percent in the U.K., and the rate of inflation is 10% in the United States and 4% in the U.K.

[A] What is the real interest rate in each nation?

[B] In which direction would international investment flow in response to these real interest rates?

[C] What impact would these investment flows have on the dollar exchange value?

Reference no: EM1375061

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