1a) Comparing the inflation rates in Canada and in the U.S., we find the inflation rate is significantly lower in Canada. The spot rate is 0.8012 USD = 1.0 CAD. One of these currencies has appreciated 4%. Which currency do we expect to appreciate? USD or CAD What is the new XR in European terms?

USD, 1.2

USD, 0.8332

CAD, 1.2

CAD, 0.8332

None of the options

1b) Consider the following information:

1-1-2017: $1.2001/;

1-1-2018: $1.2371/;

In 1027: Interest rate in the U.S. = 4%;Interest rate in the Eurozone = 2%;

What is the effective dollar interest rate from the Eurozone?

2%

3%

4%

5%

6%