Suppose the nominal risk-free rate of interest in US is 3%, and that of Canada is...

Question

Question

Answer 1

Answer #1

The correct answer is option E

Explanation :- In accordance with Fischer effect, the nominal risk free interest rate equals real rate of return plus the inflation rate.

Nominal risk free rate = Real rate of return + Inflation rate.

To calculate the inflation rate in Canada, we need to know the real rate of return.

The real rate of return for Canada is not given, hence we will not be able to find the inflation rate in Canada.

Answer 2

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