The Expected Return on Dollar Deposits in Terms of Dollars

question 62

Multiple Choice

The expected return on dollar deposits in terms of dollars, R^D, is

• A)always the interest rate on dollar deposits, i^D, for any exchange rate.
• B)the interest rate on dollar deposits, i^D, only when E_t >
• C)the interest rate on dollar deposits, i^D, only when E_t <
• D)the interest rate on dollar deposits, i^D, only when E_t =

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Definitions:

Non-Interest-Bearing

Describes a financial instrument that does not generate interest income for the holder.

Promissory Note

A pecuniary promise recorded in a document, where one side agrees to pay a definite financial sum to the other, available either on demand or on a date in the future that has been agreed upon.

Simple Interest

Interest determination based strictly on the principal sum, thereby excluding any interest that may have accrued in past periods from the calculation.

Non-Interest-Bearing

Pertaining to debt or security that does not earn interest over time, usually issued at a discount to its redemption value.