If the Interest Rate Is 7 Percent on Euro-Denominated Assets

Multiple Choice

If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar-denominated assets,and if the dollar is expected to appreciate at a 4 percent rate,the expected return on ________-denominated assets in ________ percent.

A) dollar;euros is 3
B) euro;dollars is 1
C) dollar;euros is 1
D) euro;dollars is 3