You have an opportunity to invest in Australia at an interest rate of 0.070. Moreover, you...
You have an opportunity to invest in Australia at an interest rate of 0.070. Moreover, you expect the Australian dollar (A$) to appreciate by 0.020. Your effective return from this investment is:
Homework Answers
Effective Return = [(1+0.070) * (1+0.020)] - 1
= (1.07 * 1.02) - 1
= 1.0914 - 1
Effective Return = 0.0914 or 9.14%
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