What concepts would you use to provide an explanation

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Reference no: EM132198905

Question: Interest Rate Dierential

You go home for a Halloween party where you eagerly meet your cousin Legolas for a long awaited evening drink. Deep into the conversation, he tells you that he once heard the following phrase: "The international interest rate dierential is the dierence between expected national ination rates" and confessed that he could not gure out why that is. You set out to use your Econ 4602 knowledge to provide an explanation.

a) What concepts would you use to provide an explanation to your cousin Legolas? Briey dene each of these concepts and provide the equations that describe them.

b) How would you go about deriving the equation that explains the phrase Legolas heard? Show your work.

Reference no: EM132198905

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