When interest rate parity is used to determine the spot exchange rate (the demand supply diagrams) an increase in the US interest rate, all other inputs remaining constant, will make the exchange rate (dollars per pound) A. Increase B. Decrease

One conclusion from the analysis of spot exchange rate using the ROR diagram is that an increase in the expected future spot rate will cause the current spot exchange rate to:

A. Increase B. Decrease

The spot exchange rate is $1.40 per pound. The interest rate in US is 2% and the interest rate in UK is 5%. If the uncovered interest parity holds the expected spot exchange rate (dollars per pound) will be:

A. Greater than $1.40 per pound

B. Smaller than $1.40 per pound

The spot exchange rate is $1.40 per pound. The interest rates in US and UK are 1% and 3% respectively. An investor borrows $1000 US dollars, converts the amount into pounds, and invests in a pound denominated bond. How many pounds does the investor get for $1,000? (Convert at $1.50 per pound) Report the answer rounded to two decimal places without the currency symbol.

The spot exchange rate is $1.50 per pound. The interest rates in US and UK are 1% and 3% respectively. An investor borrows $1000 US dollars, converts the amount into pounds, and invests in a pound denominated bond. If the exchange rate does not change over the year how many dollars will the investor have at the end of the year? Use the answer from question 3. Report the answer rounded to two decimal places without the currency symbol.