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Basic Question 11 of 27
Suppose that the one year interest rate is 4% in Canada (domestic country). The expected Canadian inflation rate is 2% and the expected German inflation rate is 3%. If the international Fisher relation holds, the exact one year interest rate in Germany should be _____, and the approximate amount (by linear approximation) should be ______.
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I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
explain international parity relations (covered and uncovered interest rate parity, forward rate parity, purchasing power parity, and the international Fisher effect);
describe relations among the international parity conditions;
evaluate the use of the current spot rate, the forward rate, purchasing power parity, and uncovered interest parity to forecast future spot exchange rates;
explain approaches to assessing the long-run fair value of an exchange rate;
CFA® 2025 Level II Curriculum, Volume 1, Module 8.