Suppose that the interest rate in the U.S. is 2% and the interest rate in...
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Suppose that the interest rate in the U.S. is 2% and the interest rate in Europe is equal to 4%, that the expected exchange rate is Ee$/ = 2, and that the forward (one year) value of the Euro is F$/ = 2.5 $/. According to the uncovered interest-parity condition, what is the equilibrium spot exchange rate, E$/?
a) 1.50
b) 2
c) 2.04
d) 2.5
e) need more info
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