Where Would You Prefer to Invest,and Why,if Nominal Rates Are

question 17

Multiple Choice

Where would you prefer to invest,and why,if nominal rates are 10% in the United States 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 United States; real return is 1.1% higher.
• C) Invest in United States; real return is 0.1% higher.
• D) Invest in Holland; real return is 0.24% higher.

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Definitions:

Negative Self-concept

An individual's perception of themselves that is marked by low self-esteem and a lack of confidence.

Low Self-esteem

A condition characterized by a lack of confidence in one's own worth or abilities.

Shame

A painful feeling of humiliation or distress caused by the consciousness of wrong or foolish behavior.

Guilt

The feeling of having done something wrong or failed in an obligation.