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If the Dollar Interest Rate Is 10 Percent and the Euro

Question 51

Multiple Choice

If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is 8 percent, then

A) an investor should invest only in dollars if the expected dollar depreciation against the euro is 8 percent.
B) an investor should invest only in euros an investor should invest only in dollars if the expected dollar depreciation against the euro is 8 percent.
C) an investor should be indifferent between dollars and euros an investor should invest only in dollars if the expected dollar depreciation against the euro is 8 percent.
D) an investor should invest only in dollars.
E) an investor should invest only in euros.

Correct Answer: