Estimate the expected inflation rate in united states

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A U.S. company can borrow 10,000 pounds in Great Britain for 6% interest, paying back 10,600 pounds in one year. Alternatively, the U.S. company can borrow an equivalent amount of U.S dollars in the United States and pay 13% interest. Assuming capital markets are efficient, estimate the expected inflation rate in the United States if inflation in Great Britain is expected to be zero.

a) 7%
b) 6.6%
c) 6.2%
d) 5.4%
e) 2.5%

 

Reference no: EM1354741

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