International Asset Pricing

Reading 62 on asset pricing. CFA questions 6 and 7.

Im confused as to when to add and when to multiply to work out the expected appreciation/depreciation of the currency, and the returns.

CFA just take the inflation differential rather than dividing one inflation rate by the other, to work out the expected currency move.

But then when they work out the returns, they multiply the expected currency move by the interest rate on the foreign bond. I’m pretty sure schweser just adds them together?

Is there a reason for this? (i know multiplying is more accurate, but they dont seem to be applying it consistently.) And does it matter, or will the multiple choice answers only have one of the methods?

Thanks all

Bump. Came on here as I was working through problem 6 and got confused…can anyone help walk through this problem and the correct formulas to use?