Assume That the Euro's Interest Rates Are Higher Than U

question 44

Multiple Choice

Assume that the euro's interest rates are higher than U.S. interest rates, and that interest rate parity exists. Which of the following is true?

• A) Americans using covered interest arbitrage earn the same rate of return as Germans who attempt covered interest arbitrage.
• B) Americans who invest in the U.S. earn the same rate of return as Germans who attempt covered interest arbitrage.
• C) Americans who invest in the U.S. earn the same rate of return as Germans who invest in Germany
• D) A and B
• E) None of the above

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Definitions:

Intrinsic Motivation

The drive to engage in activities for their own sake, out of interest or pleasure, rather than for external rewards.

Extrinsic Motivation

Motivation driven by external rewards such as money, fame, grades, or praise rather than intrinsic satisfaction.

Self-determination Theory

A psychological framework suggesting that people are motivated to grow and change by three basic needs: autonomy, competence, and relatedness.

Intrinsic Motivation

The drive to engage in activities for their own sake, due to internal satisfaction rather than external rewards.