The Canadian risk-free rate is 5%. The British risk-free rate is 9%. Expected inflation in Canada is 3%. What is the expected inflation rate in Britain?

A) 3%
B) 4%
C) 7%
D) 10%
E) 11%

Question

The Canadian risk-free rate is 5%. The British risk-free rate is 9%. Expected inflation in Canada is 3%. What is the expected inflation rate in Britain?A)  3%B)  4%C)  7%D)  10%E)  11%

Farukh Zubair · Accepted Answer

Final Answer : C, Explanation :  The expected inflation rate in Britain is 7%. This is because the expected inflation rate in Canada is 3%, and the British risk-free rate is 9%. The difference between these two rates is 6%, which is the expected inflation rate in Britain.

The Canadian risk-free rate is 5%. The British risk-free rate is 9%. Expected inflation in Canada is 3%. What is the expected inflation rate in Britain?

A) 3%
B) 4%
C) 7%
D) 10%
E) 11%

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