Assume that the U.S. one-year interest rate is 4% and the one-year interest rate on Australian dollars is 8%. The U.S. e

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answerhappygod
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Assume that the U.S. one-year interest rate is 4% and the one-year interest rate on Australian dollars is 8%. The U.S. e

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Assume that the U.S. one-year interest rate is 4% and the
one-year interest rate on Australian dollars is 8%. The U.S.
expected annual inflation is 5%, while the Australian inflation is
expected to be 6%. You have $100,000 to invest for one year and you
believe that PPP holds. The spot exchange rate of an Australian
dollar is $0.689. What will be the USD gain your investment if you
invest in the Australian market?
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