Question $1(2$ points$)$

$$ Soved

Answer based on the following: Interest rate on U$.$S$.$ assets $=5\%,$ interest rate on European assets $=12\%,$ the spot rate of exchange $=0\mathrm{.}90$ Euros $\frac{?}{?}$$$,$ the one year forward rate of exchange $=0\mathrm{.}95$ EUROS$/$ $$.$ The expected rate of return on Euro assets for the European citizen is$.$

$12\%$

$5\%$

$7\%$

$3\%$