Assume that the interest rate on a one-year insured bank deposit in the United States is 3%,
Question:
Assume that the interest rate on a one-year insured bank deposit in the United States is 3%, and the interest rate on a 1-year insured bank deposit in Albania is 8%.
Using the simplified formula, for the actual returns of these two investments to be similar from the perspective of investors in the United States, by how much (as a percentage) does the Albanian currency have to change over the investment horizon?
Using the full formula, for the actual returns of these two investments to be similar from the perspective of investors in the home country, by how much (as a percentage) does the foreign currency have to change over the investment horizon?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill