Define uncovered interest parity. What is the relationship amongthe forward exchange rate, the spot exchange rate, and the interestrate? Suppose the (1-year) interest rate on bank deposits is 2% inCanada and 1.75% in United States. If the (1-year) forward US$–C$exchange rate is C$1.25 per US$ and the spot rate is C$1.2 per US$,will the C$ depreciation or appreciation against the US$ over oneyear, and by how much?                                                                  Â
