Separated by the Atlantic:

Separated by the Atlantic:

Separated by more than 3,000 nautical miles and five time zones, money and foreign exchange markets in both London and New York are very efficient. The following information has been collected from the respective areas: SHOW ALL WORK. Assumptions London New York Spot exchange rate ($/Ac‚¬) 1.3264 1.3264 1-year Treasury bill rate 3.900% 4.500% Expected inflation rate Unknown 1.250%a .) What is the real interest rate in New York? b.)what is the inflation in london? c.)what is one year forward rate?

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