Assume that interest rate parity holds. The U.S. four-year interest rate is 5% annualized, and the Indian four-year interest rate is 8% annualized. Today's spot rate of the Indian rupee is $.14. What is the approximate four-year forecast of the rupee's spot rate if the four-year forward rate is used as a forecast?

$.262.

$.174.

$.125.

$.226.

$.115.

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Question 73 pts

If inflation rate in Canada is 5%, while the inflation rate in the U.S. is 3%. According to PPP, the Canadian dollar should ____ by ____%.

Appreciate; 1.94

Depreciate; 1.90%

Depreciate; 4.85

Appreciate 4.85%