AP foreign exchange question 3

 3. Assume that the real interest rates in both Canada and India have been 5 percent. Now the real interest rate in India increases to 8 percent.
(a) Using a correctly labeled graph of the foreign exchange market for the Canadian dollar, show the effect of the higher real interest rate in India on each of the following. 

 (i) Supply of the Canadian dollar. Explain.  Supply of Canadian dollars will increase, bc the demand for India's currency ( rupee) will increase.  Canadian investors will be attracted by the higher real interest rate in India and increase their purchase of Indian financial assets. 
 (ii) The value of the Canadian dollar, assuming flexible exchange rates  depreciates