If the interest rate is 4% on euro deposits and 2% on dollar deposits, while the euro

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If the interest rate is 4% on euro deposits and 2% on dollar deposits, while the euro is trading at $1.30 per euro, what does the market expect the exchange rate to be one year from now?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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Financial Markets And Institutions

ISBN: 978-0132136839

7th Edition

Authors: Frederic S. Mishkin, Stanley G. Eakins

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