If the expected sharemarket yield in Australia is 16% per annum and the expected annual depreciation of the AUD/USD exchange rate is 4%, then 'share market parity' (SMP) says that:

Question

Quizplus · Accepted Answer

Share market parity suggests that the difference in expected returns between two countries' share markets should equal the expected change in exchange rates. Thus, if the Australian market yields 16% and the AUD is expected to depreciate by 4%, the expected US market return would be 12% (16% - 4%).

If the Expected Sharemarket Yield in Australia Is 16% Per