Where Would You Prefer to Invest, and Why, If Nominal

question 92

Multiple Choice

Where would you prefer to invest, and why, if nominal rates are 10% in Canada and 25% in Holland, while the expected rates of inflation are 5% and 19% respectively? Assume investments of equal risk.

• A)Invest in Holland due to higher nominal rate.
• B)Invest in Canada; real return is 1.1% higher.
• C)Invest in Canada; real return is 0.1% higher.
• D)Invest in Holland; real return is 0.28% higher.

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Definitions:

Distinctiveness

A principle suggesting that an event or object is memorable or noticeable because it differs significantly from other events or objects.

Consistency

The principle of maintaining the same attitudes, beliefs, and behaviors over time, which contributes to the predictability and stability of one's actions.

Neuroticism

A personality trait characterized by a long-term tendency to be in a negative emotional state, including feelings of anxiety, depression, and emotional instability.

Mental Illnesses

Disorders that affect an individual's mood, thinking, and behavior, examples include depression, anxiety disorders, schizophrenia, and bipolar disorder.