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Current $/ spot exchange rate is $1.22/. It is expected that German bunds will yield a 5% return next year. If the return on German

Current $/ spot exchange rate is $1.22/. It is expected that German bunds will yield a 5% return next year. If the return on German bunds from a perspective of an Australian investors point of view is 8% next year, by how much will Euro appreciate or depreciate against AUD next year? Please select the most suitable option

a.

Depreciate by 2.77%
b.

Depreciate by 2.86%
c.

Appreciate by 2.86%
d.

Appreciate by 2.77%

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