If U.S.securities pay 6 percent interest, and if Great Britain's securities pay 8 percent interest, then

Question

Quizplus · Accepted Answer

According to the interest rate parity theory, higher interest rates in a country (in this case, Great Britain) lead to an appreciation of its currency (pounds) relative to a country with lower interest rates (in this case, the United States). This is because investors will seek to invest in the currency with a higher return, increasing demand for that currency and driving up its exchange rate. Therefore, pounds are likely to appreciate relative to dollars. The other options are not necessarily true based on the given information.

If USSecurities Pay 6 Percent Interest, and If Great Britain's Securities