Assume that the interest rate is 8% in the US, and the interest rate is 5% in Europe. Then, in the long run (according to the interest parity):

1. The dollar should appreciate (with respect to the euro) by 3%
2. The dollar should appreciate (with respect to the euro) by 2%.
3. The dollar should depreciate (with respect to the euro) by 3%
4. The dollar should depreciate (with respect to the euro) by 2%.