The current one-year interest rate in the U.S. is i$ = 2% and the current...
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The current one-year interest rate in the U.S. is i$ = 2% and the current one-year interest rate in the euro zone is i = 5%. The spot exchange rate is $1.25/ and the one-year forward exchange rate is $1.20/. If investors carry out covered interest arbitrage, The euro interest rate will _________________. The US$ will _______________ against the euro in the spot market
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