Assume that U.S. and British investors require a real return of 1.6 %. The nominal U.S. interest rate is 12.6 %, and the nominal British interest rate is 8.4 %. The current spot exchange rate is 1.34 USD/GBP.
If the IFE holds, what is the expected percent change in the value of the British pound relative to the dollar, over the course of the year?
Enter answer in percents