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

question 85

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 0.24% higher r_$(real) =