Question: Suppose the expected exchange rates are the average expectations by investors of exchange rates in one year. Imagine that the interest rates are for equally

Suppose the expected exchange rates are the average expectations by investors of exchange rates in one year. Imagine that the interest rates are for equally risky assets and are annual rates.

United states Australia Singapore Current exchange rate - 1.98 A$/US$ 1.93 S$/US$ Expected exchange rate - 2.09 A$/US$ 1.82 S$/US$ Current interest rate (%) 3.0 5.0 2.0

Calculate the rate of return for a U.S. dollar investing in the Australian deposit for one year.

Calculate the rate of return for U.S. dollar investing in the Singapore deposit for one year.

Among these three options (United States, Australia, and Singapore), which is the best place for the investor to invest? Which is the worst place?

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