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review 1. Suppose the interest rate on a dollar deposit is 2% and the interest rate on a euro deposit is 8%. Suppose today the
review 1. Suppose the interest rate on a dollar deposit is 2% and the interest rate on a euro deposit is 8%. Suppose today the exchange rate is $1/1, and the expected rate one year in the future is $0.90/1. Does a euro deposit yield a higher expected rate of return? What are the rates of returns for both deposit? 2. If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar denominated assets, and if the dollar is expected to appreciate at a 4 percent rate, for Francois the Frenchman the expected rate of return on dollar-denominated assets is A) 11 percent. B) 9 percent C) 5 percent D) 3 percent. E) 1 percent 2. If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar denominated assets, and if the dollar is expected to appreciate at a 4 percent rate, for Tom the American the expected rate of return on dollar-denominated assets is A) 11 percent. B) 9 percent C) 5 percent D) 3 percent E) 1 percent. 3. If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar denominated assets, and if the Euro is expected to appreciate at a 4 percent rate, for Francois the Frenchman the expected rate of return on dollar-denominated assets is A) 11 percent. B) 9 percent. C) 5 percent. D) 3 percent E) 1 percent
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