If I_d Is the Domestic Interest Rate, I_f Is the Foreign

question 14

Multiple Choice

If i_d is the domestic interest rate, i_f is the foreign interest rate, xa is the expected rate of appreciation of the foreign currency (or the expected rate of depreciation of the home currency) , and financial capital is mobile across countries (and assuming no risk premium) , then equilibrium in international financial asset markets is indicated by the expression

• A) xa = (i_d/i_f).
• B) xa = i_d + i_f.
• C) i_f = i_d + xa.
• D) i_d = i_f + xa

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