Just wondering if anyone could shed some light on the following:
Information given is
US rfr : 7% Eurozone rfr : 9.08% Jap rfr: 3.88%
Anticipated and historical inflation- US : 3% Jap 0% Eurozone 5%
The question asks if the Japanese and Eurozone inflation rates are correct assuming the US inflation of 3% and Fisher holds
To my mind for the Euro the calculation should be (1+US infl)/(1 + EU infl)=(1+ US int)/(1+EU int)
Which is (1.03)/(1.05)=(1.07)/(1.0908). Obviously the two sides balance indicating Fisher holds. Or so i thought
However, the answer states that neither Jap or Euro inflation rates whereas my calculations indicate they are both correct.
Can anyone tell me where ive gone wrong please?