Question :
14.3 The Demand for Foreign Currency Assets
1) What the expected : 1303581
14.3 The Demand for Foreign Currency Assets
1) What is the expected dollar rate of return on euro deposits if today’s exchange rate is $1.10 per euro, next year’s expected exchange rate is $1.166 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%?
A) 10%
B) 11%
C) -1%
D) 0%
E) 15%
2) What is the expected dollar rate of return on dollar deposits if today’s exchange rate is $1.10 per euro, next year’s expected exchange rate is $1.165 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%?
A) 10%
B) 11%
C) -1%
D) 0%
E) 15%
3) 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%
4) The dollar rate of return on euro deposits is
A) approximately the euro interest rate plus the rate of depreciation of the dollar against the euro.
B) approximately the euro interest rate minus the rate of depreciation of the dollar against the euro.
C) the euro interest rate minus the rate of inflation against the euro.
D) the rate of appreciation of the dollar against the euro.
E) the euro interest rate plus the rate of inflation against the euro.
5) If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then an investor should
A) invest only in dollars.
B) invest only in euros.
C) be indifferent between dollars and euros.
D) invest only in dollars if the exchange rate is expected to remain constant.
E) invest only in euros if the exchange rate is expected to remain constant.
6) If the dollar interest rate is 4 percent, the euro interest rate is 6 percent, then
A) an investor should invest only in dollars.
B) an investor should invest only in euros.
C) an investor should be indifferent between dollars and euros.
D) invest only in dollars if the exchange rate is expected to remain constant.
E) invest only in euros if the exchange rate is expected to remain constant.
7) If the dollar interest rate is 10 percent, the euro interest rate is 6 percent, then
A) an investor should invest only in dollars if the expected dollar depreciation against the euro is 4 percent.
B) an investor should invest only in euros if the expected dollar depreciation against the euro is 4 percent.
C) an investor should be indifferent between dollars and euros if the expected dollar depreciation against the euro is 4 percent.
D) an investor should invest only in dollars.
E) an investor should invest only in euros.
8) If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then
A) an investor should invest only in dollars if the expected dollar depreciation against the euro is 8 percent.
B) an investor should invest only in euros if the expected dollar depreciation against the euro is 8 percent.
C) an investor should be indifferent between dollars and euros if the expected dollar depreciation against the euro is 8 percent.
D) an investor should invest only in dollars.
E) an investor should invest only in euros.
9) If the dollar interest rate is 10 percent, the euro interest rate is 12 percent, then
A) an investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent.
B) an investor should invest only in euros an investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent.
C) an investor should be indifferent between dollars and euros an investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent.
D) an investor should invest only in dollars.
E) an investor should invest only in euros.
10) A the beginning of 2012, you pay $100 for a share of stock that then pays you a dividend of $1 at the beginning of 2013. If the stock price rises from $100 to $109 per share over the year, then you have earned an annual rate of return of
A) 5 percent.
B) 1 percent.
C) 9 percent.
D) 4 percent.
E) 10 percent.
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