Suppose the interest rate is 7% on euro-denominated assets of a one year maturity and 5 percent on a dollar-denominated assets of a one-year maturity, and the current spot exchange rate for the euros in terms of the dollars is $1.50/ . If the dollar is expected to appreciate at 4 percent rate, what is the rate of return that a French investor can expect to earn on a dollar-denominated assets?

1. 3%
2. 1%
3. 5%
4. 11%