Suppose the interest rate in Japan is 2 percent and the yen per euro exchange rate is expected to appreciate by 1 percent.If interest-rate parity holds, then the interest rate in France is

Question

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According to interest rate parity, the difference in interest rates between two countries should equal the expected change in exchange rates. In this scenario, if Japan's interest rate is 2 percent and the yen per euro exchange rate is expected to appreciate by 1 percent, then the interest rate in France should be 3 percent (2% Japan rate + 1% expected exchange rate appreciation). Therefore, the best choice is A) 3 percent.

Suppose the Interest Rate in Japan Is 2 Percent and the Yen