If the dollar interest rate is 10 percent and the euro interest rate is 6 percent,...

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If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then an investor should D) invest only in dollars if the exchange rate is expected to remain constant. C) be indifferent between dollars and euros. E) invest only in euros if the exchange rate is expected to remain constant. O B) invest only in euros. O A) invest only in dollars. Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro. Further, assume that the spot exchange rate is $1.05 per euro, and the interest rate on dollar deposits is 10 percent and on euro it is 4 percent. Under these assumptions, O B) interest parity does hold. C) it is hard to tell whether interest parity does or does not hold. O E) interest parity fluctuates. D) Not enough information is given to answer the question. A) interest parity does not hold. O O If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then an investor should D) invest only in dollars if the exchange rate is expected to remain constant. C) be indifferent between dollars and euros. E) invest only in euros if the exchange rate is expected to remain constant. O B) invest only in euros. O A) invest only in dollars. Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro. Further, assume that the spot exchange rate is $1.05 per euro, and the interest rate on dollar deposits is 10 percent and on euro it is 4 percent. Under these assumptions, O B) interest parity does hold. C) it is hard to tell whether interest parity does or does not hold. O E) interest parity fluctuates. D) Not enough information is given to answer the question. A) interest parity does not hold. O O

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1 The answer is A Invest only in dollars if the exchange rate is e... View the full answer