If the Nominal One-Year Risk-Free Interest Rate in the U

If the nominal one-year risk-free interest rate in the U.S. is 5 percent and the nominal one-year risk-free interest rate in another country is 8 percent, which of the following statements must be true if the markets are in equilibrium and there are no restrictions on capital flows?

A) The foreign currency is expected to decrease in value relative to the U.S. dollar.
B) Investors will prefer to invest their money in the foreign country because they like to earn a higher interest rate.
C) Investors will prefer to invest their money in the foreign country because their total rate of return in one year will be higher.
D) The foreign currency is expected to increase in value relative to the U.S. dollar.
E) Knowing only the interest rates in the two countries does not give us enough information to make an informed judgment of the direction of movement in the value of the currency.