Question: (Can i please know which answer is correct and why ? ) In the above question, suppose the interest parity condition holds and the USD

(Can i please know which answer is correct and why ? )

In the above question, suppose the interest parity condition holds and the USD risk-free interest rates have not changed since businesses in Saudi Arabia started purchasing US dollars in large quantities. Also, everyone is confident that SAMA can keep the SAR-USD exchange rate constant for many years to come. Further, assume that the GDP, price level, long-term prospects, and the parameters of the Saudi economy do not change as a result of the USD purchases. Finally, assume that the Saudi money market has been in equilibrium before and after the dollar purchase. In this situation, as a result of the dollar purchase by businesses, the risk-free interest rates in Saudi Arabia

a.must have gone up.

b.must have gone down.

c.may have gone up or down.

d.should have remained unchanged.

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