4 Suppose that the three-months interest rate in New York is 5 percent and the three-months interest rate in London is 4 percent, and that the spot rate is £0.50/$ (e=d/f ) and the three months forward rate is £0.47/$ (eF =d/f). If UK is the domestic country, calculate the covered interest differential. On the basis of this result, which country would you expect to face capital inflows and which one would face capital outflows? Explain by referring to the relevant concepts.
Subject Name: Economics
If you want the solution to this assignment or want to discuss any other assignment or course you may contact us directly at firstname.lastname@example.org or message us on Whatsapp or Viber at +91-9303607402 (http://api.whatsapp.com/send?phone=919303607402&text=Hello%20 )