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A U.S. resident can earn 6 percent interest on a one-year bank deposit of $100,000 at home. Alternatively, she can convert the $100,000 into euros and earn 4 percent on a one-year bank deposit in Germany. If the exchange rate is initially 1.5 euros per dollar and then changes to 1.45 euros per dollar in one year, which deposit would have given the U.S. resident a higher return ?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M945515

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