Assume That You Forecast the Value of the Euro as Follows

question 31

Multiple Choice

Assume that you forecast the value of the euro as follows for the next year:
$\begin{array}{cccc}\underline {\text { Percentage Change} }&\underline{ \text { Probability of Occurrence }} \\ \text {-2\% } &30\%\\ \text { 3\% } &40\%\\ \text { 5\% } &30\%\\\end{array}$

If the interest rate on the euro is 12%, the expected effective yield from a euro-denominated deposit is:

• A) 15.36%.
• B) 15.70%.
• C) 12.00%.
• D) 14.35%.
• E) none of the above

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