Suppose the Japanese interest rate is 0 03 percent If the ROR works out to be around 11 3 percent, after taking the Japanese interest rate, the spot yen dollar exchange rate, and the expected exchange rate into account, then it can be concluded that a Japanese investor would not only earn nothing, but would lose money, if she purchased a Japanese certificate of deposit False True When the forward exchange rate is such that a forward trade costs more than a spot trade today costs, there is said to be a capital gain False True Consider an American investor considering both domestic and British investment options If the rate of return on a British asset is negative, it implies that e the effect of the British interest rate on the return is stronger than that of the appreciation of the pound the American interest rate on a comparable asset is higher than the British interest rate there is excess demand for the pound in the Forex market the depreciation of the pound has a stronger impact on the return than the British interest rate Which of the following statements is true regarding the rate of return on foreign asset If the domestic currency is expected to depreciate, the rate of return on the foreign asset will be lower than the foreign interest rate If the domestic currency is expected to appreciate, the rate of return on the foreign asset will be lower than the foreign interest rate If the expected exchange rate is same as the spot rate, the rate of return will be lower than the foreign interest rate If the expected exchange rate is same as the spot rate, the rate of return will be lower than the foreign interest rate The yen dollar exchange rate fell from just over 92 dollar in June 2010 to 84 7 dollar in August 2010 Meanwhile, the value of the greenback vis vis the euro changed from $1 19 euro in June to $1 29 euro in August This means the dollar appreciated with respect to both the yen and the euro True False

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Posted on Sep 15, 2024

Suppose the Japanese interest rate is 0.03 percent. If the ROR works out to be around -11.3 percent, after taking the Japanese interest rate, the spot yen-dollar exchange rate, and the expected exchange rate into account, then it can be concluded that a Japanese investor would not only earn nothing, but would lose money, if she purchased a Japanese certificate of deposit.
1. False
2. True

When the forward exchange rate is such that a forward trade costs more than a spot trade today costs, there is said to be a capital gain.

Consider an American investor considering both domestic and British investment options. If the rate of return on a British asset is negative, it implies that:e:
1. the effect of the British interest rate on the return is stronger than that of the appreciation of the pound.
2. the American interest rate on a comparable asset is higher than the British interest rate.
3. there is excess demand for the pound in the Forex market.
4. the depreciation of the pound has a stronger impact on the return than the British interest rate.

Which of the following statements is true regarding the rate of return on foreign asset?

1. If the domestic currency is expected to depreciate, the rate of return on the foreign asset will be lower than the foreign interest rate.
2. If the domestic currency is expected to appreciate, the rate of return on the foreign asset will be lower than the foreign interest rate.
3. If the expected exchange rate is same as the spot rate, the rate of return will be lower than the foreign interest rate.
4. If the expected exchange rate is same as the spot rate, the rate of return will be lower than the foreign interest rate.

The yen/dollar exchange rate fell from just over 92/dollar in June 2010 to 84.7/dollar in August 2010. Meanwhile, the value of the greenback vis--vis the euro changed from $1.19/euro in June to $1.29/euro in August. This means the dollar appreciated with respect to both the yen and the euro.