Author Question: What is the expected dollar rate of return on euro deposits if today's exchange rate is 1.167 per ... (Read 64 times)

Kikoku · **on:** Jun 30, 2018

What is the expected dollar rate of return on euro deposits if today's exchange rate is 1.167 per euro, next year's expected exchange rate is 1.10 per euro, the dollar interest rate is 10, and the euro interest rate is 5?

A) 10
B) 11
C) -1
D) 0

Question 2

Which of the following is a FALSE statement concerning purchasing power parity?

A) Purchasing power parity states that dollars will tend to exchange for pounds at a rate that maintains a constant purchasing power of a given quantity of a currency.
B) Over the long term, a Big Mac in New York will tend to cost the same as a Big Mac in London.
C) There should not be significant deviations in the long-run value of purchasing power parity.
D) Over the long run, purchasing power parity exerts influence over exchange rates.
E) An overvalued dollar buys more in Britain than it does in the United States.