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Question: 2 interest rate parity suppose the us dollar interest rate...

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2. Interest Rate Parity: Suppose the US dollar interest rate and the Canadian dollà (a) Suppose the expected future exchange rate (BeADIUSp) is fixed at USD 1.05 for 1 CAD, (b) Suppose ECAD/USD remains the same while the US interest rate decreases to 8%. If (RusD) interest rate (RCA) are the same, 10% per year what is the equilibrium current exchange rate, ECADIUSD the Canadian interest rate remains the same as before, what is the new equilibrium ECAD/USD?

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