as in other asset markets, participants in the foreign exchange market base their demands for deposits of different currencies on a comparison of these assets’ expected rates of return. to compare returns on different deposits, market participants need two pieces of information. first, they need to know how the money values of the deposits will change. second, they need to know how exchange rates will change so that they can translate rates of return measured in different currencies into compa
Last Update: 2020-09-15
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all else equal, individuals prefer to hold those assets offering the highest expected real rate of return. our later discussions of particular assets will show, however, that often is not equal. some assets may be valued by savers for attributes other than the expected real rate of return they offer. savers care about two main characteristics of an asset other than its return its risk, the variability it contributes to savers wealth, and its liquidity, the ease with which the asset can be sold