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Qtwo points] Answer the following questions using the diagram below M the uncovered interest parit},r (DIP) approximation 1'3 = ig + (Egg E5..-}J'E$. {Round any
Qtwo points] Answer the following questions using the diagram below M the uncovered interest parit},r (DIP) approximation 1'3 = ig + (Egg E5..-}J'E$. {Round any calculations to three decimal places): Foreign Exchange Market At our starting point: - The interest rate on dollar deposits {33} is 2.5% - The interest rate on peso deposits {jg} is g - The dollar-peso spot exchange rate (E3545) is $0.050 Domestic Interest rate 3'D% - The dollar-peso expected exchange rate (533%), which remains constant throughout, is at $0.045 2.5% 2.0% Foreign Return (FR) 0.0496 0.049? 0.0490 0.0499 0.0500 0.0501 0.0502 0.0503 Spot Exchange Rat? E\" 2a. If the dollar interest-rate rises from 2.5% to 3%, does the dollar appreciate or depreciate? \"that should be the new spot exchange rate the uncovered interest parity holds? 2b. If the dollar interest-rate falls from 2.5% to 1.0%, does the dollar appreciate or depreciate? \"that should be the new spot exchange rate the uncovered interest parity holds
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