$\backslash$table$[[\backslash$table$[[$Interest rate on$],[$dollar deposit$]],\backslash$table$[[$Interest rate on$],[$euro deposit$]],\backslash$table$[[$Expected future$],[$exchange rate $($in$],[$one year$)]]],[0\mathrm{.}01,0\mathrm{.}03,1\mathrm{.}225],[0\mathrm{.}01,0\mathrm{.}03,1\mathrm{.}225],[0\mathrm{.}01,0\mathrm{.}03,1\mathrm{.}225],[0\mathrm{.}01,0\mathrm{.}03,1\mathrm{.}225]]$

Assume that initially the spot exchange rate is Edollar$/$euro $=1\mathrm{.}25($i$.$e$.$ the FX market is in equilibrium$).$ Then the US central bank increases the interest rate from $1\%$ to $2\%.$

What will happen to the domestic return schedule as a result?

What will happen to the foreign return schedule?

Calculate and state the new equilibrium spot exchange rate.