Question: Q2. Assume that the current exchange rate between $ and Russian Ruble is 30Rb/$. The Russian Central Bank announces that Ruble will not get weaker

Q2. Assume that the current exchange rate between $ and Russian Ruble is 30Rb/$. The Russian Central Bank announces that Ruble will not get weaker than 40Rb/$ during the next year. Assume that one-year Ruble interest rate is 10% and one-year $ interest rate is 5%. Do you find the Central Banks announcement credible? Explain. (Hint: What does Uncovered Interest Parity (UIP) suggest for the future spot rate?) (Show your calculations!)

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