Instructions Instructions 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. Current exchange rate Expected exchange rate Current interest rate (%) United states 3.0 Australia 1.98 A$/US$ 2.09 A$/US$ 5.0 Singapore 1.93 S$/US$ 1.82 S$/US$ 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?
Instructions Instructions 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. Current exchange rate Expected exchange rate Current interest rate (%) United states 3.0 Australia 1.98 A$/US$ 2.09 A$/US$ 5.0 Singapore 1.93 S$/US$ 1.82 S$/US$ 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?
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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help me understand rate on return
Transcribed Image Text:Instructions
Instructions
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.
Current exchange rate
Expected exchange rate
Current interest rate (%)
United states
3.0
Australia
1.98 A$/US$
2.09 A$/US$
5.0
Singapore
1.93 S$/US$
1.82 S$/US$
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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