Assume the Interest Parity Condition Holds and That Individuals Expect

question 64

Multiple Choice

Assume the interest parity condition holds and that individuals expect the dollar to appreciate by 5% during the coming year.Given this information,we know that

• A)the interest rate differential between the two countries is less than 5%.
• B)i < i*.
• C)i = i*.
• D)individuals will only hold foreign bonds.
• E) none of the above

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