Assume The Interest Rate Is 16 On Pounds Sterling And 7 On The Euro At The Same Time 3259566

Assume the interest rate is 16% on pounds sterling and 7% on the Euro. At the same time, inflation is running at an annual rate of 3% in Germany and 9% in England. a.If the Euro is selling at a one-year forward premium of 10% against the pound, is there an arbitrage opportunity? Explain. b.What is the real interest rate in Germany? in England?

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