Suppose that the dollar is now worth 1 1372 If one year German bunds are yielding 9 8 and one year U S Treasury bonds are yielding 6 5 , at what end of year exchange rate will the dollar returns on the two bonds be equal What amount of euro appreciation or depreciation does this equilibrating excha...

To begin given that German bunds are yielding more than US Treasuries it is clear that fo ...

Suppose that the dollar is now worth 1.1372. If one-year German bunds are yielding 9.8% and one-year

Question:

Suppose that the dollar is now worth €1.1372. If one-year German bunds are yielding 9.8% and one-year U.S. Treasury bonds are yielding 6.5%, at what end-of-year will the dollar returns on the two bonds be equal? What amount of euro appreciation or depreciation does this equilibrating represent?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...