Using the UIP Equation, What Would Happen to the Spot

question 126

Multiple Choice

Using the UIP equation, what would happen to the spot rate for euros if the dollar-euro exchange rate is expected to appreciate in the future?

• A) The spot rate to purchase euros would rise (dollar depreciation).
• B) The spot rate to purchase euros would fall (dollar appreciation).
• C) The spot rate to purchase euros would remain unchanged.
• D) The spot rate to purchase euros would remain unchanged today, but rise in the future (dollar depreciation).

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