Real Interest Rates, Expected Inflation, Irp, And The Spot Rate.

19. Real Interest Rates, Expected Inflation, IRP, and the Spot Rate. The U. S. and the countryof Rueland have the same real interest rate of 3%. The expected inflation over the next year is 6percent in the U. S. versus 21% in Rueland. Interest rate parity exists. The one-year currency futurescontract on Rueland’s currency (called the ru) is priced at $. 40 per ru. What is the spot rate of the ru?

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Real Interest Rates, Expected Inflation, IRP, and the Spot Rate.

Question
19. Real Interest Rates, Expected Inflation, IRP, and the Spot Rate. The U.S. and the country

of Rueland have the same real interest rate of 3%. The expected inflation over the next year is 6

percent in the U.S. versus 21% in Rueland. Interest rate parity exists. The one-year currency futures

contract on Rueland’s currency (called the ru) is priced at $.40 per ru. What is the spot rate of the ru?

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