1. Assume that the interest parity condition holds and risk-free, one-year interest rates in Japan and the Euro area have been 1% and 2%, respectively. If the European Central Bank lowers the interest rate in the Euro area to 1.5%, the expected appreciation of yen vis--vis the euro during the next 12 months

a)will rise.

b)will decline.

c)will remain unchanged.

d)may rise, may decline.