Perfect Asset Substitutability Is the Assumption That

question 44

Multiple Choice

Perfect asset substitutability is the assumption that

• A) the foreign exchange market is in equilibrium only when expected returns on domestic assets are greater than returns on foreign currency bonds.
• B) the foreign exchange market is in equilibrium only when expected returns on foreign currency bonds are greater than returns on domestic assets.
• C) the foreign exchange market is in equilibrium only when expected returns on all assets are negative.
• D) the foreign exchange market is in equilibrium only when expected returns on domestic assets are equal to returns on foreign currency bonds.
• E) the foreign exchange market is in equilibrium only when domestic assets are risk-free.

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