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 | Faculties

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Priyanka Tomar

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📊 International Financial Management

Q. 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

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✅ Correct Answer: (A) U.S. dollar depreciates by 2 percent a year.

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