International Economics 8th Edition by Dennis Appleyard, Alfred Field

Exercise 3

In addition to the interest rate information in Question 2, you also note that the deposit rate in the United States is 6½ percent and the lending rate is 8½ percent. Where would you expect the eurodollar deposit and lending rates to be? Why? What would you expect to happen to any difference between the above pairs of interest rates if U.S. local tax rates on international financial activity were reduced? Why?
Question 2
You notice in The Wall Street Journal that the interest rate in the U.S. money markets is 7½ percent and the interest rate in London is 9 percent. Would you expect the pound to be at premium or discount? Why?