Bond yields and long run currency movements

a. Go the web site of The Economist (www.economist.com) and find data on 10-year interest rates. Look in the section "Markets \& Data" and then the subsection "Economic and Financial Indicators." Look at the 10-year interest rates for the United States, Japan, China, Britain, Canada, Mexico, and the Euro area. For each country (treating the Euro area as a country), calculate the spreads as that country's interest rate minus the U.S. interest rate.

b. From the uncovered interest parity condition, the spreads from part

(a) are the annualized expected appreciation rates of the dollar against other currencies. To calculate the 10-year expected appreciation, you must compound. (So, if \(x\) is the spread, the 10-year expected appreciation is \(\left[(1+x)^{10}-1ight]\). Be careful about decimal points.) Is the dollar expected to depreciate or appreciate by much against the currency of any of its six major trading partners?

c. Given your answer to part (b), for which country(ies) is a significant appreciation or depreciation of the dollar expected over the next decade? Does your answer seem plausible?