If the Expected Proportionate Change in the Nominal Exchange Rate

Multiple Choice

If the expected proportionate change in the nominal exchange rate, measured in units of domestic currency per unit of foreign currency, is 2 percent and the domestic interest rate is 6 percent, then according to the uncovered interest parity condition, the foreign interest rate should be equal to:

A) 6 percent × 2 percent = 12 percent.
B) 6 percent + 2 percent = 8 percent.
C) 6 percent - 2 percent = 4 percent.
D) 6 percent ÷ 2 percent = 3 percent.