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Assume That Interest Rate Parity Holds, and the Euro's Interest

question 17

Multiple Choice

Assume that interest rate parity holds, and the euro's interest rate is 9% while the U.S. interest rate is 12%. Then the euro's interest rate increases to 11% while the U.S. interest rate remains the same. As a result of the increase in the interest rate on euros, the euro's forward ____ will ____ in order to maintain interest rate parity.


Definitions:

The English

Refers to the people of England or aspects related to them, including their language and culture.

Culture

The shared beliefs, values, norms, and practices that characterize a group of people or society.

Shared Rules

Commonly agreed upon guidelines or norms that govern behavior within a group or society.

Norms

Shared expectations or rules within a society or group about how members should act in specific situations.

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