Posted by Anonymous on Saturday, October 1, 2011 at 5:54pm.
You read in a newspaper that the nominal interest rate is 12 percent per year in Canada and 8 percent per year in the United States. Suppose that the real interest rates are equalized in the two countries and that purchasingpower parity holds.
a) Using the Fisher equation, what can you infer about expected inflation in Canada and in the United States?
b) What can you infer about expected change in the exchange rate between the Canadian dollar and the U.S. dollar?
c) A friend proposes a getrichquick scheme: borrow from a US bank at 8%, deposit the money in a Canadian bank at 12%, and make a 4% profit. What is wrong with this scheme?

Macroeconomics  Hnin , Saturday, February 4, 2017 at 12:25am
a b c
Answer This Question
Related Questions
 Macroeconomics  You read in a newspaper that the nominal interest rate is 12 ...
 Economics  The nominal interest rate is 12 percent per year in Canada and 8 ...
 Economics  You read in a newspaper that the nominal interest rate is 12 percent...
 Econ  The nominal interest rate is 12 percent per year in Canada and 8 percent ...
 Economics  The nominal interest rate is 12 percent per year in Canada and 8 ...
 Economics  If the velocity of circulation is constant, real GDP is growing at 3...
 Need help by tonite FINANCE  2. Interest rates A twoyear Treasury security ...
 FINANCE  2. Interest rates A twoyear Treasury security currently earns 5.25 ...
 Economics  The formula given was: (real rate of interest) = (nominal rate of ...
 macroeconomics  Assume that a series of inflation rates is 1 percent, 2 ...
More Related Questions