Suppose That a U

question 119

Multiple Choice

Suppose that a U.S. dollar can earn interest of 5 percent a year in Chicago and a Canadian dollar can earn interest of 7 percent a year in Winnipeg. Will money flow from Chicago to Winnipeg?

• A)Yes, because the returns on money are higher in Winnipeg.
• B)No, because the outflow of U.S. funds would create a decrease in the U.S. dollar value, penalizing investors when they attempted to recover their funds.
• C)No, if investors expect that the Canadian dollar will appreciate by at least 2 percent per year.
• D)No, if investors expect the U.S. dollar to appreciate by at least 2 percent per year.
• E)No, as long as the U.S. dollar maintains higher purchasing power than the Canadian dollar.

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Definitions:

Competitive Disadvantage

A condition or circumstance that puts a company at a less favorable position in the market compared to its competitors.

Entrepreneurial Task

Activities or responsibilities undertaken by an entrepreneur in the process of starting and managing a business.

Investment Pools

Collective investment schemes where funds from multiple investors are pooled together to purchase securities.

Venture Capitalists

Investors who provide capital to startup companies or small businesses with the potential for long-term growth, often in exchange for equity.