If the interest rate on euro-denominated assets is 13 percent and it is 15 percent on peso-denominated assets,and if the euro is expected to appreciate at a 4 percent rate,for Manuel the Mexican the expected rate of return on euro-denominated assets is

Question

Quizplus · Accepted Answer

The expected rate of return on euro-denominated assets for Manuel, who holds pesos, combines the interest rate on the euro assets (13%) with the expected appreciation of the euro against the peso (4%). The total expected rate of return is therefore 13% + 4% = 17%.

If the Interest Rate on Euro-Denominated Assets Is 13 Percent