Flexible exchange rates, it was once thought, would bring more stability to the market. Instead, volatility and large fluctuations exist. If investors expected a decrease of 5% in interest rates for 3 years, but rates were only decreased 2% for years 2 and 3, would occur . In a flexible exchange rate regime, domestic and foreign interest rates are in parity. The central bank decides to reduce the current domestic interest rate from 7.00% to 3.25% for one year. The current exchange rate (rounded to the nearest percent) then decreases to