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9. Hong Kong fixes its exchange rate with the US$ at HK$7.8/US$, but the financial...

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Finance

9. Hong Kong fixes its exchange rate with the US$ at HK$7.8/US$, but the financial market expects a 30% chance of a 20% devaluation of the HK$ in the coming month, and a 70% chance of no devaluation. To maintain the fixed exchange rate at HK$7.8/US$, the interest rate differential between the HK$ and US$ (measured in annual %) needs to be _____________________ %

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