Question: Currently 1 U.S. Dollar is equal to 64 Russian Rubles. The interest rate of the Russian Central Bank is 10%, and the interest rate of the US central bank (FED) is 0.25%.
a. According to the interest parity condition we have seen in our class, what should be the expected US-Dollar to Russian Ruble exchange rate (one year later) to have a equilibrium in the exchange rate market?
b. According to your answer in part (a), would the Russian ruble depreciate or appreciate? Explain.