Remember:

Ret D = iD + (E+1 – Et)/Et (in euros)

This is the expected return on dollar-denominated assets in euros.

Recall that $ is the domestic currency and any other currency is considered as
foreign currency (euros for example)

iD= Expected return on dollar assets = Ret D

iF= Expected return on foreign assets= Ret F

(E+1 – Et)/Et = the expected rate of

appreciation of $
E+1= expected exchange rate for next period
Et= spot exchange rate

Ret F = iF – (E+1 – Et)/Et (in $)

This is the expected return on euros-denominated assets in dollar

Interest Parity condition

Ret D = Ret F
This can be rewrite as follow:

iD= iF – (E
+1 – Et)/Et Equilibrium condition for

the foreign Exchange market.

Ret D = iD - iF + (E – E )/E
Relative +1 t t
This is the relative expected return on dollar assets.