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Suppose that U.S. one-year interest rate is 8%, and U.K. one-year interest rate is 6%. Assume one British pound is worth $1.58. (a) According to
Suppose that U.S. one-year interest rate is 8%, and U.K. one-year interest rate is 6%. Assume one British pound is worth $1.58. (a) According to uncovered interest parity (UIP), is the U.S. dollar expected to appreciate or depreciate relative to the British pound over the year? Why? (b) According to UIP, what is the expected exchange rate in one year
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