Explain what factors determine the expected return on a foreign ...

[washai]

Explain what factors determine the expected return on a foreign bond.
 
  What will be an ideal response?

Question 2

Which of the following assumptions best characterized the assumption about how individuals formed expectations of inflation by the early 1970s?
 
  A) Expected inflation for the current year was smaller than the previous year's inflation rate.
  B) Expected inflation for the current year was approximately equal to the previous year's inflation rate.
  C) Expected inflation for the current year was less than the previous year's inflation rate.
  D) Expected inflation for the current year equal to the average inflation rate over the past five years.
  E) Expected inflation for the current year equal to the average inflation rate over the past ten years.

[Kedrick2014]

Answer to Question 1

The current exchange rate, the current foreign interest rate, and the future expected exchange rate.

Answer to Question 2

B