From the viewpoint of a U.S. resident, describe the merits of investing in foreign bonds
What will be an ideal response?
Answer: The merits include the
(a) potential for higher average annual returns on a portfolio.
(b) potential for capital appreciation due to exchange rate movements.
(c) ability to purchase either U.S.-pay or foreign-pay bonds.
(d) probability of low default risk.
(e) benefits of portfolio diversification.
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