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Suppose that expectations are not taken into account and US investors shift their funds into Europe. Once they cash in on their capital gains, they will need to repatriate their profits. In doing so, the demand for dollars increases and the dollar appreciates relative to the euro or, alternatively, the euro depreciates against the dollar. What financial aspects do the US investors need to look at before deciding to invest in Europe?

Suppose that expectations are not taken into account and US investors shift their funds into Europe. Once they cash in on their capital gains, they will need to repatriate their profits. In doing so, the demand for dollars increases and the dollar appreciates relative to the euro or, alternatively, the euro depreciates against the dollar. What financial aspects do the US investors need to look at before deciding to invest in Europe?

International Financial Management
International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 34QA
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Suppose that expectations are not taken into account and US investors shift their funds into Europe. Once they cash in on their capital gains, they will need to repatriate their profits. In doing so, the demand for dollars increases and the dollar appreciates relative to the euro or, alternatively, the euro depreciates against the dollar. What financial aspects do the US investors need to look at before deciding to invest in Europe?
Transcribed Image Text:Suppose that expectations are not taken into account and US investors shift their funds into Europe. Once they cash in on their capital gains, they will need to repatriate their profits. In doing so, the demand for dollars increases and the dollar appreciates relative to the euro or, alternatively, the euro depreciates against the dollar. What financial aspects do the US investors need to look at before deciding to invest in Europe?
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