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Roar Roar
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6 years ago
For this question, assume that interest parity holds, the future expected exchange rate is constant, the current nominal exchange rate is 1.2, the one-year foreign interest rate is 6% and the one-year domestic interest rate is 3%. Given this information, one can conclude that
A) financial market participants expect that the exchange rate (E) will increase by 3% over the coming year.
B) financial market participants expect that the exchange rate (E) will decrease by 3% over the coming year.
C) financial market participants expect that the domestic currency to depreciate by 3% over the coming year.
D) financial market participants expect that the exchange rate (E) will increase by 20% over the coming year.
Textbook 
Macroeconomics

Macroeconomics


Edition: 6th
Authors:
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vonCOLLINZOvonCOLLINZO
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6 years ago
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Roar Author
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This calls for a celebration Person Raising Both Hands in Celebration
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You make an excellent tutor!
linlinlin
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Thanks
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