The nominal interest rate in the U. S. is 7% and the nominal interest rate in U. K. is 4%. If the real interest rate parity held we can conclude that:
a the expected inflation rate in the U. S. is less than the same in U.K.
b the exchange rate in terms of dollars per pound is expected to rise.
c the expected inflation rate in U. K. is less than the same in the U. S.
d arbitrage profits can be earned by borrowing in dollars and investing in pounds.