In comparing the returns on U.S. and German Treasury securities, investors
A) should forecast the future dollar/euro exchange rate.
B) may disregard the future dollar/euro exchange rate.
C) should assume the future dollar/euro exchange rate is the same as today's.
D) should assume the euro will depreciate if the German interest rate is above the U.S. interest rate.

Question

Quizplus · Accepted Answer

Investors should forecast the future dollar/euro exchange rate when comparing the returns on U.S. and German Treasury securities because the exchange rate will affect the returns when the securities are converted back to the investor's home currency.

In Comparing the Returns on U