Suppose that one-year Treasury bills yield 5 percent in the United States and 6 percent in France. Investors will prefer the U.S. securities if they expect the dollar to __________ against the euro over the next year.
A) depreciate by less than 1 percent
B) depreciate by more than 1 percent
C) appreciate by less than 1 percent
D) appreciate by more than 1 percent

Question

Quizplus · Accepted Answer

If investors expect the dollar to appreciate against the euro, they will prefer the U.S. securities because they will receive a higher return in dollar terms.

Suppose That One-Year Treasury Bills Yield 5 Percent in the United