Assume risk neutral behavior

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Suppose it is believed that the U.S. dollar will steadily depreciate against the euro at a rate of 2% a year over the next three years. After that, people expect the dollar–euro rate to be steady. Ten-year U.S. government dollar bonds yield 8%. What would you expect the yield to be on 10-year euro government bonds? Assume risk neutral behavior.

Reference no: EM131236690

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