Suppose the interest rate on a one-year U.S. bond were 10 percent and the interest rate on an equivalent Canadian bond were 8 percent. If the interest-rate parity condition holds, is the U.S. dollar expected to appreciate or depreciate relative to the Canadian dollar over the next year?

You would expect the U.S. dollar to (appreciate or depreciate).

Explain your choice.

If the interest parity condition holds, the return on the two bonds should be (different or equal) . For this to happen, given the interest rates on the two bonds, the holder of the Canadian bond must (lose or gain) from the movement in the exchange rate over the year.