Assume That the U

question 93

Multiple Choice

Assume that the U.S. interest rate is 5%, the European interest rate is 2%, and the future expected exchange rate in one year is $1.224. If the spot rate is $1.16, then the expected dollar return on euro deposits is:

• A) 7.52%
• B) 5%
• C) 3.2%
• D) 2%

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Definitions:

Standard Normal Probability Distribution

A normal distribution with a mean of 0 and a standard deviation of 1, used in statistical analysis to represent standardized values of a dataset.

Probability Density Function

A function that describes the likelihood of a random variable to take on a particular value.

Continuous Random Variable

A variable whose value is not fixed and can assume an infinite number of values within a given range.

Normal Probability Distribution

A bell-shaped distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.