If the interest rate in Australia is 4.5%, the interest rate in the US is 2.5%, and the Australian dollar is expected to depreciate by 2.5%, what is the expected gain by holding Australian bond -4.5% O a. O b. All of the answers here are incorrect 4.5% O C. O d. 0.5%

If the interest rate in Australia is 4.5%, the interest rate in the US is 2.5%, and the Australian dollar is expected to depreciate by 2.5%, what is the expected gain by holding Australian bond -4.5% O a. O b. All of the answers here are incorrect 4.5% O C. O d. 0.5%

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 2QR

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Question

If the interest rate in Australia is 4.5%, the interest rate in the US is 2.5%, and the Australian dollar is expected to depreciate by 2.5%, what is the expected gain by holding Australian bond?
a.
All of the answers here are incorrect
b.
C.
d.
-4.5%
e.
4.5%
0.5%
2.0%

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