Suppose the Interest Parity Condition Holds

question 24

Essay

Suppose the interest parity condition holds.Also assume that the one-year interest rate in the United States is 6% and that the one-year interest rate in Canada is 5%.What does this imply about the current versus future expected exchange rate (for the U.S.and Canadian dollars)? Explain.

---

Definitions:

Long-Term

Referring to an extended period of time, often implying lasting significance or effect.

Executive

A senior-level manager or administrator, typically within an organization, who makes important decisions and oversees operations.

Procedural

Relating to an established or official way of doing something, often involving a series of steps or operations.

Autobiographical

Pertaining to the account of a person’s life, written or told by that person.