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17 February, 14:30

The current exchange rate is 0.93 euros per dollar, but you believe the dollar will decline to 0.85 euros per dollar. If a euro-denominated bond is yielding 2%, what return do you expect in U. S. dollars?

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  1. 17 February, 14:52
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    The return you expect in U. S. dollars is 1.116%

    Explanation:

    0.85 = 0.93 (1+0.02/1+X)

    0.85/0.93 = 1.02/X

    0.913978 = 1.02/X

    X = 1.02/0.913978

    = 1.116%

    Therefore, The return you expect in U. S. dollars is 1.116%
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