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18. Suppose the interest rate on a one-year U.S. bond is 10 percent and the interest rate on an equivalent Canadian bond is 8 percent. If the...

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18. Suppose the interest rate on a one-year U.S. bond is 10 percent and the interest
rate on an equivalent Canadian bond is 8 percent. If the interest-rate parity condi-
tion holds (see Appendix to Chapter 10), is the U.S. dollar expected to appreciate
or depreciate relative to the Canadian dollar over the next year? Explain your choice. ( L03 )

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