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Does interest rate parity hold

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Consider an Australian investor with 10,000 Australian dollars (AUD) to place in a bank deposit in either Australia or Great Britain. The one-year interest rate on bank deposits is 3% in Britain and 7% in Australia. The one-year forward AUD-pound exchange rate is 1.65 AUD per pound and the spot rate is 1.5 AUD per pound.

Does interest rate parity hold? Be specific why or why not.

Reference no: EM133239378

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