Question: 7.The US interest rate is i$ = 3 % for the next year and the UK interest rate is i = 6%. If I borrow

7.The US interest rate is i$ = 3 % for the next year and the UK interest rate is i = 6%. If I borrow money in UK and invest in US for the next year, uncovered IRP (carry trade) suggests that I will make money if and only if:

a.

the pound appreciates against the dollar by about 3%.

b.

the pound appreciates against the dollar by less than 3%.

c.

the dollar appreciates against the pound by more than 3%.

d.

the dollar appreciates against the pound by less than 3%.

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