Assume that the U.S. interest rate is 5%, the European interest rate is 2%, and the...

Transcribed Image Text:

Assume that the U.S. interest rate is 5%, the European interest rate is 2%, and the future expected exchange rate in one year is $1.224. If the spot rate is $1.16, then, using the approximation in equation 15-1, the expected dollar return on euro deposits is: 5%. 2%. 7.52%. 3.2%. Assume that the U.S. interest rate is 5%, the European interest rate is 2%, and the future expected exchange rate in one year is $1.224. If the spot rate is $1.16, then, using the approximation in equation 15-1, the expected dollar return on euro deposits is: 5%. 2%. 7.52%. 3.2%.