Question

Assume that the Uncovered Interest Parity​ (UIP) holds. If the rate of return on a euro asset is 22 percent and the rate of return on a comparable dollar asset is 55 ​percent, the expected rate of dollar depreciation must be

Answer 1

The answer is rate 33. Therefore,

Refer below for the explanation.

Step-by-step explanation:

As per the question,

Euro asset is 22 percent and the rate of return on a comparable dollar asset is 55 ​percent,

Return on comparable dollar asset - return on euro asset

= 55% - 22%

= 33 expected rate

Answer 2

33

Step-by-step explanation:

The expected rate of return of dollar = return on comparable dollar asset - return rate on euro asset

= 55 - 22

= 33