if the interest rate is 7% on euro-denoninated assets and 5 percent on dollar denominated assets,and...

if the interest rate is 7% on euro-denoninated assets and 5 percent on dollar denominated assets,and if ten dollar is expected to appreciate af a 4 percent rate, for Tom the American the expected rate of return in dollar -denominated assets is?

Solutions

Expert Solution

Here Tom is American

And he invests in dollar denominated assets

So his return is interest rate of dollar denominated assets

I.e., 5%

Explanation:

Since he is American and he is investing in dollar denominated assets no exchange calculations are required and there will be no benefit or loss from appreciation of dollar.

jeff jeffy answered 2 years ago

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