If the Interest Rate Is 13 Percent on Euro Deposits

question 16

Multiple Choice

If the interest rate is 13 percent on euro deposits and 15 percent on dollar deposits,and if the euro is expected to appreciate at a 4 percent rate relative to the dollar,then

• A) euro deposits have a lower expected return than dollar deposits.
• B) the expected return on euro deposits in terms of dollars is 9 percent.
• C) the expected return on dollar deposits in terms of euros is 19 percent.
• D) both A and B of the above will occur.
• E) none of the above will occur.

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Definitions:

Average Tax Rate

The ratio of the total amount of taxes paid to the total taxable income, representing the percentage of income paid in taxes.

Proportional Tax

A tax system where the rate of taxation is the same for all taxpayers, regardless of income or wealth.

Payroll Tax

Duties levied on both employers and employees, usually reflecting a portion of the payroll expenses.

Per-hour Wage

The sum of money an employee receives for working one hour.