CHAPTER 12

# The theory of asset demand suggests that the most

• Notes
• UltraLightningSkunk9345
• 7

This preview shows pages 3–5. Sign up to view the full content.

25) The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign deposits is A) the level of trade and capital flows. B) the expected return on these assets relative to one another. C) the liquidity of these assets relative to one another. D) the riskiness of these assets relative to one another. Answer: B 26) When François the Foreigner considers the expected return of dollar deposits in terms of foreign currency, the expected return must be adjusted for 155 27) The expected return on the dollar deposit in terms of foreign currency can be written as the _____ of the interest rate on dollar deposits and the expected appreciation of the dollar. 28) If the interest rate on foreign deposits (i F ) increases, holding everything else constant, 29) If the interest rate on dollar deposits is 10 percent, and the dollar is expected to appreciate by 7 percent over the coming year, the expected return on dollar deposits in terms of the foreign currency is A) 3 percent. B) 10 percent. C) 13.5 percent. D) 17 percent. E) 24 percent. Answer: D 30) If the interest rate is 7 percent on euro deposits and 5 percent on dollar deposits, and if the dollar is expected to appreciate at a 4 percent rate, 31) If the interest rate is 13 percent on euro deposits and 15 percent on dollar deposits, and if the euro is expected to appreciate at a 4 percent rate relative to the dollar, then 156

This preview has intentionally blurred sections. Sign up to view the full version.

This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern