Question 15 Which of the following should occur (short-term), according to the Purchasing Power Parity (PPP) theory, using the data below?

	Canada	Japan
Inflation rates	9%	6%
Interest rates (nominal)	11%	7%
Exchange rate	CD1	Y120.2860

-the Canadian dollar is expected to appreciate vs. the Yen.

-the Yen is expected to depreciate vs. the Canadian dollar.

-the Canadian dollar is expected to depreciate vs. the Yen.

-both currencies will depreciate.

-both currencies will appreciate.