Assume That the Interest Parity Condition Holds

question 44

Multiple Choice

Assume that the interest parity condition holds.Also assume that the U.S.interest rate is 8% while the U.K.interest rate is 6%.Given this information,financial markets expect the pound to

• A)depreciate by 14%.
• B)depreciate by 2%.
• C)appreciate by 2%.
• D)appreciate by 6%.
• E) appreciate by 14%.

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Definitions:

Prosecutor

A legal official who conducts criminal proceedings on behalf of the government.

Damages

Monetary compensation awarded by a court to a person who has suffered loss or injury due to the unlawful act or negligence of another.

Comparative Negligence

A legal doctrine that distributes the responsibility and damages among the parties involved in an accident based on their respective degrees of fault.

Ordinary Care

The standard of care that a reasonably prudent person would use in a similar situation to avoid harm to others.