Solution
= Solution
The Dollar bank account is a tradable asset whose Euro value is $Y_t e^{r_Dt}$. Under the Euro <equivalent martingale measure>, discount this value by $e^{r_Et}$. The result is a <martingale> precisely when $\mu+r_D-r_E=0$, giving
$$
\boxed{\mu=r_E-r_D\quad\text{under }Q_E.}
$$
When the rates coincide, $\mu=0$ and part (a) proves that the exchange rate itself is a <martingale> under $Q_E$.