Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the

Question

TuteeHUB · Accepted Answer

U.S. dollar appreciates by 2 percent a year.

TuteeHUB · Answer

U.S. dollar depreciates by 2 percent a year.

TuteeHUB · Answer

U.K. pound depreciates by 2 percent a year.

TuteeHUB · Answer

None of the above answers is correct because interest rate parity requires that the interest

1.	Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the
A.	U.S. dollar depreciates by 2 percent a year.
B.	U.S. dollar appreciates by 2 percent a year.
C.	U.K. pound depreciates by 2 percent a year.
D.	None of the above answers is correct because interest rate parity requires that the interest
Answer» B. U.S. dollar appreciates by 2 percent a year.

Discussion