If the Interest Rate Is 7 Percent on Euro Deposits

question 53

Multiple Choice

If the interest rate is 7 percent on euro deposits and 5 percent on dollar deposits,and if the dollar is expected to appreciate at a 4 percent rate,

• A) euro deposits have a higher expected return than dollar deposits.
• B) the expected return on euro deposits in terms of dollars is 11 percent.
• C) the expected return on dollar deposits in terms of euros is 1 percent.
• D) the expected return on euro deposits in terms of dollars is 3 percent.
• E) the expected return on dollar deposits equals the expected return on euro deposits.

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