Assume that the domestic interest rate is 2%, the foreign interest rate is 4% and that the domestic currency is expected to appreciate by 2% during the coming year. Based on this information:
1) no correct answer.
2) individuals will be indifferent about holding domestic or foreign bonds.
3) more than one of the answers are correct.
4) the interest parity condition holds.
5) individuals will only hold foreign bonds.
6) individuals will only hold domestic bonds.