Assignment:
Q1. Does interest rate parity imply that interest rates are the same in all countries?
Q2. Why might purchasing power parity fail to hold?
Q3. A currency trader observes that in the spot exchange market, 1 U.S. dollar can be exchanged for 9 Mexican pesos or for 111.23 Japanese yen. What is the crossexchange rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged?
Provide complete and step by step solution for the question and show calculations and use formulas.