Suppose the Interest Rate in Canada Falls and the Interest

question 42

Multiple Choice

Suppose the interest rate in Canada falls and the interest rate in Japan remains the same. Interest rate parity implies that given equal risk,

• A)the inflation rate is higher in Japan.
• B)Japanese financial investments are more profitable.
• C)the yen is expected to depreciate against the dollar.
• D)the yen is expected to appreciate against the dollar.
• E)Canadian financial investments are less profitable.

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