Use the following table to answer the next two questions
European Expected value of the dollar in 3 months
Investor (dollars per euro)
Investor #1 $1.30
Investor #2 $1.20
Investor #3 $1.15
-If the current exchange value of the dollar is $1.25 per euro
A) European Investor #1 expects a dollar depreciation against the euro,but European Investors #2 and #3 expect a dollar appreciation
B) European Investor #1 expects a dollar appreciation against the euro,but European #2 and #3 expect a dollar depreciation
C) all three European investors expect that the dollar will depreciate against the euro
D) all three European investors expect that the dollar will appreciate against the euro

Question

Quizplus · Accepted Answer

European Investor #1 expects a dollar depreciation because their expected value of the dollar in 3 months is lower than the current exchange value. On the other hand, European Investors #2 and #3 expect a dollar appreciation because their expected values are higher than the current exchange value.

Use the Following Table to Answer the Next Two Questions