If the Interest Rate in the U

question 22

Multiple Choice

If the interest rate in the U.S.is i_$ = 5 percent for the next year and interest rate in the U.K.is i_£ = 8 percent for the next year,uncovered IRP suggests that

• A)the pound is expected to depreciate against the dollar by about 3 percent.
• B)the pound is expected to appreciate against the dollar by about 3 percent.
• C)the dollar is expected to appreciate against the pound by about 3 percent.
• D)the pound is expected to depreciate against the dollar by about 3 percent and the dollar is expected to appreciate against the pound by about 3 percent.