We Would Not Expect a Japanese Financial Asset and a U.S

question 30

Multiple Choice

We would not expect a Japanese financial asset and a U.S. financial asset with identical risk, liquidity, and information characteristics to have different expected returns because

• A)the U.S. and Japanese governments have pledged themselves to avoid this outcome.
• B)traders would buy the asset with the higher expected yield and sell the asset with the lower expected yield until the yields were brought into equality.
• C)traders would sell the asset with the higher expected yield and buy the asset with the lower expected yield until the yields were brought into equality.
• D)the exchange rate between the dollar and the yen would adjust automatically to eliminate any difference in yields.

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Definitions:

Chronological Record

A documentation method in which events or transactions are recorded in the order that they occurred.

Assets

Resources owned by a company that have economic value and can be converted into cash.

Liabilities

Financial obligations or debts that an entity owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Debits

Entries in accounting that represent an increase in assets and expenses or a decrease in liabilities, equity, and revenue.