European government bond rate

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Assume that the one-year U.S. Treasury bond rate is 3% and the similar European government bond rate is 5%. Comparing these inflation rates, could it be expected that the dollar will appreciate or depreciate against the euro over the next year? Explain. In addition, if the spot rate is 1.50 dollars per euro, what would be the forward rate?

Reference no: EM132163754

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