The Wall Street Journal indicated, in its issue of Friday, November 9, 2012, that, in late trading on Thursday, November 8, 2012, the spot U.K. pound was selling at a price of $1.5983 per pound. At the same time, the six-months forward U.K. pound was selling at a price of $1.5974 per pound. Observation of these rates indicates that the U.K. pound was selling at a six-months forward __________ against the dollar, and, if covered interest parity had indeed been attained at that time, the conclusion could validly be reached that interest rates in the United Kingdom were __________ than comparable interest rates in the United States.

Question

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The U.K. pound was selling at a discount in the forward market compared to the spot market ($1.5974 vs. $1.5983), indicating that it was expected to weaken against the dollar. If covered interest parity holds, this implies that interest rates in the U.K. must be higher than those in the U.S. to compensate for the expected depreciation of the pound.

The Wall Street Journal Indicated, in Its Issue of Friday