If the Effective Return Differential Between Assets of Two Countries

question 30

Multiple Choice

If the effective return differential between assets of two countries is zero, then there would be

• A) a risk premium in the forward exchange market.
• B) a short position in the foreign exchange market.
• C) a systematic risk taken by international investors.
• D) no risk premium in the forward exchange market.

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Definitions:

Social Learning

Social learning is the process by which individuals learn new behaviors, attitudes, and values by observing the actions and outcomes of others' behaviors.

Social Facilitation

The tendency for people to perform differently when in the presence of others than when alone.

Deindividuation

A psychological state where individuals in a group lose self-awareness and feel less responsible for their actions, often leading to uninhibited behavior.

Elaboration Likelihood Model

A dual-process theory describing the change of attitudes and the manner and likelihood that leads to a change through either central or peripheral route processing.