Posted: March 24th, 2017
A U. S. Company can borrow 10,000 pound in Great Britain for 6% interest, paying back 10,600 pounds in one year. Alternatively, the U.S. Company can borrow an equivalent amount of U.S. Dollars in the United States and pay 13% interest. Assuming the capital markets are efficient, estimate the expected inflation rate in the United States if inflation in Great Britain is expected to be zero. 7% 6.6% 6.2% 5.4%
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