Suppose the interest rate on a one-year U.S. bond is 10 percent and the interest rate on

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Suppose the interest rate on a one-year U.S. bond is 10 percent and the interest rate on an equivalent Canadian bond is 8 percent. If the interest-rate parity condition holds, is the U.S. dollar expected to appreciate or depreciate relative to the Canadian dollar over the next year? Explain your choice.

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Money Banking and Financial Markets

ISBN: 978-0078021749

4th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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