The Figure Given Below Depicts the Foreign Exchange Market for British

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-Suppose a Canadian investor buys a one-year U.S. government bond that pays 7 percent interest. If the U.S. dollar appreciates 4 percent against the Canadian dollar during the year, what must be the yield on a comparable Canadian government bond for interest rate parity to hold?

A) 3 percent
B) 4 percent
C) 7 percent
D) 10 percent
E) 11 percent