If investors can cover themselves in the forward market, they will take advantage of interest rate differentials by:
a. buying assets (lending) denominated in the high-interest rate currency, and selling assets (borrowing) in the low-interest rate currency.
b. removing funds from both investments.
c. turning over their investment portfolio to an expert in one of the two nations.
d. selling assets denominated in high-interest rate currency and buying assets in the low-interest rate currency.
Ans: a. buying assets (lending) denominated in the high-interest rate currency, and selling assets (borrowing) in the low-interest rate currency.
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Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. CalculatorsPer HourComputersPer HourSmith10010Jones1206If Smith and Jones are dividing their time efficiently and producing fewer than 10 computers and more than 120 calculators per hour, then Smith will ________ and Jones will ________.
A. produce only calculators; split his time between computers and calculators B. produce only calculators; produce only computers C. produce only computers; produce only calculators D. split his time between computers and calculators; produce only calculators
Figure 3-2
In Figure 3-2, the production possibilities frontier has a bowed-out shape because of the law of
A. decreasing costs. B. increasing costs. C. demand. D. comparative advantage.
Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. ________ has a comparative advantage in teapots and ________ has a comparative advantage in coffeepots
A) Orange Rose; Blue Violet B) Blue Violet; Orange Rose C) Blue Violet; Blue Violet D) Orange Rose; Orange Rose
"Compared to a competitive market, a single-price monopoly decreases the consumer surplus and increases the economic profit." Is the previous statement correct or incorrect? Explain your answer
What will be an ideal response?