You have an opportunity to invest in Australia at an interest rate of 8%.Moreover,you expect the Australian dollar (A$)to appreciate by 2%.Your effective return from this investment is:

Question

Quizplus · Accepted Answer

The effective return from this investment can be calculated as follows:

Effective return = (1 + interest rate) * (1 + exchange rate appreciation) - 1

= (1 + 0.08) * (1 + 0.02) - 1

= 1.0896 - 1

= 0.0896 or 8.96%

Therefore, the best choice is C, which is the closest to the calculated effective return of 8.96%.

You Have an Opportunity to Invest in Australia at an Interest