You Have the Opportunity to Invest in the United States

question 82

Multiple Choice

You have the opportunity to invest in the United States at 6% or invest in an equally risky Australian investment that offers 20%.This is too good to be true! The current exchange rate is A$1.65/$.Which of the following do you suspect about this one-year investment?

• A) Expected inflation is higher in the United States.
• B) The one-year forward exchange rate is A$1.8679/$.
• C) Real interest rates are higher in the United States.
• D) The Australian Dollar is selling forward at an 8.48% premium relative to the U.S. Dollar.

---

Definitions:

Cranial Nerve

One of the twelve nerves that emerge directly from the brain, not the spinal cord, and primarily serve the head and neck regions with various functions like sensation and movement.

Clench Teeth

involves forcefully pressing the upper and lower teeth together, often as a physical response to stress or to stabilize the jaw.

Trigeminal

Pertaining to the trigeminal nerve, which is the fifth cranial nerve responsible for sensation in the face and motor functions such as biting and chewing.

Trochlear

Pertaining to the fourth cranial nerve (trochlear nerve) which is primarily involved in eye movement.