The Next Questions Refer to the Following

Multiple Choice

The next questions refer to the following.
Suppose currency traders expect that one year from now, £1 will be worth $1.50, and the one-year risk-free interest rate in the UK is 7% while the one-year risk-free rate in the US is 3%.
-Suppose American prices are twice as high as British prices,but there is no inflation occurring or expected in either country. In the short run,the US interest rate is 10% and the British interest rate is 5%. Then on the spot market,according to UIP,

A) £1 = $0.60 and the pound will depreciate to $0.50
B) £1 = $2.10 and the pound will depreciate to $2.00
C) £1 = $1.91 and the pound will appreciate to $2.00
D) £1 = $2.05 and the pound will depreciate to $2.00
E) £1 = $0.45 and the pound will appreciate to $0.50