Assume a one year U.S. bond pays 4.0% interest and a similar U.K. bond pays 5.2% interest. Which of the following changes will establish interest rate parity?
a. The British pound would be expected to appreciate by 1.2% against the U.S. dollar.
b. The U.S. dollar would be expected to depreciate by 1.2% against the British pound.
c. The British pound would be expected to depreciate by 1.2% against the U.S. dollar.
d. The British pound would be expected to appreciate by 9.2% against the U.S. dollar.
e. The U.S. dollar would be expected to appreciate by 9.2% against the British pound.
c
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A good generalization about developing countries is
a. savings rates are low b. investment rates are low c. exports are mostly food and raw materials d. population growth rates are high e. none of the above
Without government intervention, society is likely to get too little production of: i. private goods that generate external costs ii. private goods that generate external benefits iii. public goods
a. (i) only b. (ii) only c. (iii) only d. both (ii) and (iii)
Which of the following events, ceteris paribus, would cause a rightward shift in the demand curve for euros?
a. an decrease in the average income of European consumers b. an increase in European tastes for American goods c. an increase in the average income of U.S. consumers d. an increase in U.S. tariffs on European goods
At the current level of output, a firm's marginal cost equals 16 and marginal revenue equals 10. The firm
A) is producing the profit-maximizing amount. B) should produce more. C) should produce less. D) Not enough information.