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What is the expected exchange rate one year from now

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Reference no: EM132623809

Suppose you have $1000 that serves as margin for a $9000 one year loan where the interest rate is 1%. You invest the total = $10,000 in Europe where the exchange rate is $1.25 $/€. The one year interest rate in Europe is 4%.

a. According to UIP, what is the expected exchange rate one year from now?

Reference no: EM132623809

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