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 Francois the Frenchman the expected rate of return on peso-denominated assets is

Question

Quizplus · Accepted Answer

The expected rate of return on peso-denominated assets for Francois is the interest rate on pesos (15%) minus the expected appreciation of the euro (4%), which equals 11%.

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