If the Dollar Interest Rate Is 10 Percent and the Euro

question 52

Multiple Choice

If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then an investor should

• A) invest only in dollars.
• B) invest only in euros.
• C) be indifferent between dollars and euros.
• D) invest only in dollars if the exchange rate is expected to remain constant.
• E) invest only in euros if the exchange rate is expected to remain constant.

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Definitions:

Classical Conditioning

A learning process through which a neutral stimulus becomes associated with a meaningful stimulus and acquires the capacity to elicit a similar response.

US

United States, a country primarily located in North America comprising 50 states and a federal district.

Classical Conditioning Experiment

A research method used in behavioral psychology to study the association between a naturally occurring stimulus and a previously neutral stimulus.

CS

An abbreviation for conditioned stimulus, which in classical conditioning is a previously neutral stimulus that, after association with an unconditioned stimulus, comes to trigger a conditioned response.