You Have the Opportunity to Invest in the United States

question 44

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 1-year investment?

• A) Expected inflation is higher in the United States.
• B) The 1-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 dollar.

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Definitions:

New Model Army

A highly disciplined and effective military force organized in 1645 by the Parliamentarians during the English Civil War, contributing significantly to their victory over the Royalists.

Society of Friends

Also known as Quakers, this is a Christian denomination known for its commitment to peace, simplicity, and equality.

Navigation Acts

A series of laws that were enacted by the British Parliament in the 17th century to regulate trade and commerce between England and its colonies.

Mourning Wars

Historical conflicts among Native American societies, primarily in the Northeast and Midwest, where raids were conducted to avenge the dead or capture members from other tribes to replace lost community members.