​Assume That the U

question 12

Multiple Choice

​Assume that the U.S. interest rate is 10 percent, while the British interest rate is 15 percent. If interest rate parity exists, then:

• A) ​British investors who invest in the United Kingdom will achieve the same return as U.S. investors who invest in the United States.
• B) ​U.S. investors will earn a higher rate of return when using covered interest arbitrage than what they would earn in the United States.
• C) ​U.S. investors will earn 15 percent whether they use covered interest arbitrage or invest in the United States.
• D) ​U.S. investors will earn 10 percent whether they use covered interest arbitrage or invest in the United States.

Understand the challenges in marketing research, including assessing consumer willingness and collecting primary data.

Understand the structure and significance of major stock indices in the U.S. and abroad.

Grasp the essentials of financial instruments such as certificates of deposit, bonds, and their insurance mechanisms.

Recognize the tax exemption percentages for dividends from preferred stocks.

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Definitions:

Perpetuity

A type of annuity that pays an infinite series of cash flows, with no end date.

Duration

Duration measures a bond's sensitivity to interest rate changes, representing the weighted average time until a bond's cash flows are paid to the investor.

Annual Pay

The total monetary compensation an employee receives from their employer in a one-year period, including all forms of salary, bonuses, and other financial benefits.

Asset Portfolios

Collections of various types of investments held by individuals or institutions to diversify risk and achieve financial goals.