Suppose that the current exchange rate is 1.50 = 1 but it is expected to be 1.35

Question:

Suppose that the current exchange rate is є1.50 = £1 but it is expected to be є1.35 = £1 in one year. If the current interest rate on a oneyear government bond in Germany is 4%, what does the interest-rate parity condition indicate the interest rate will be on a one-year government bond in the United Kingdom? Assume that there are no differences in risk, liquidity, taxation, or information costs between the bonds.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...