1. What is the trade-weighted exchange rate of the U.S. dollar? What explains the increase in the trade-weighted exchange rate of the U.S. dollar in the late 1990s and late 2000s?
2. What is the interest-rate parity condition? How does the interest-rate parity condition account for differences in interest rates in different countries on similar bonds?
3. What are the main reasons that interest-rate parity may not hold exactly?