in the expected rate of depreciation of the home currency)
12. The term xa in the textbook is defined as the expected rate of appreciation of the foreign currency. A mathematical way to express this definition [where e is the spot rate of the foreign currency and E(e) is the expected future spot rate of the foreign currency] is __________.
A) E(e) - e
B)
$\frac { e } { E ( e ) }$
C)
$\frac { E ( e ) - 1 } { e }$
D)
$\frac { E ( e ) - e } { e - 1 }$

Question

in the expected rate of depreciation of the home currency)
12.	The term xa in the textbook is defined as the expected rate of appreciation of the foreign currency.  A mathematical way to express this definition [where e is the spot rate of the foreign currency and E(e) is the expected future spot rate of the foreign currency] is __________.
A) E(e) - e
B) 
$\frac { e } { E ( e ) }$
C) 
$\frac { E ( e ) - 1 } { e }$
D) 
$\frac { E ( e ) - e } { e - 1 }$

Quizplus · Accepted Answer

The formula that expresses xa (the expected rate of appreciation of the foreign currency) is E(e)/e - 1, which is equivalent to answer C. This can be derived by starting with the formula for the percentage change in the spot rate:
[(E(e) - e)/e] * 100%
Then, dividing both sides by 100% and factoring out e in the numerator gives:
E(e)/e - 1
Therefore, answer C is the correct choice.

In the Expected Rate of Depreciation of the Home Currency) eE(e)\frac { e } { E ( e ) }E(e)e​

In the Expected Rate of Depreciation of the Home Currency) $\frac { e } { E ( e ) }$