Using the data in the table below,

A) if the interest parity condition holds and the interest rate on the dollar is 5%, find graphically the equilibrium dollar for euro exchange rate.

B) explain graphically the impact of a change in the dollar interest rate from 5% to 9% on the equilibrium dollar for euro exchange rate.

C) holding the interest rate on the dollar at 9% assume that the interest rate on the euro increased to 6%. Show on a graph what would happen to the equilibrium exchange rate.

Expected on Euro O.00 2 0. 01 1 2 Case Re EseEse Expected depreciation dollar return on $ 1 0.04 1.01 1.05.63 2 0.04 3 0.04 1.01 1.03 0 1.04 |0,0288 | 0.019 0.021 0.04| 1.01| 4 1.02| -0.00a6-100302 1.01 1.01 1.02-0.00 6 6.0302 5 0.04 1.01 0.04 1.01 | 1.001 uoesou,al o.og 0521.092 015 14S 7 0.04 1.01 0.98 001 8 0.04 1.01 0.962 , 092 0.04| 1.01 | 0.95| 0(032 10 0.04 1.01 0.94 Expected on Euro O.00 2 0. 01 1 2 Case Re EseEse Expected depreciation dollar return on $ 1 0.04 1.01 1.05.63 2 0.04 3 0.04 1.01 1.03 0 1.04 |0,0288 | 0.019 0.021 0.04| 1.01| 4 1.02| -0.00a6-100302 1.01 1.01 1.02-0.00 6 6.0302 5 0.04 1.01 0.04 1.01 | 1.001 uoesou,al o.og 0521.092 015 14S 7 0.04 1.01 0.98 001 8 0.04 1.01 0.962 , 092 0.04| 1.01 | 0.95| 0(032 10 0.04 1.01 0.94