Problem
What would be the real rates of return on the assets in the preceding question if the price changes described were accompanied by a simultaneous 10 percent increase in all dollar prices? Suppose the dollar interest rate and the pound sterling interest rate are the same. 5 percent per year. What is the relation between the current equilibrium Sit exchange rate and its expected future level? Suppose the expected future $/£ exchange rate, $1.52 per pound, remains constant as Britain's interest rate rises to 10 percent per year. If the U.S. interest rate also remains constant. what is the new equilibrium Sit exchange rate?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.