You Have the Opportunity to Invest in the United States

question 42

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 AUD1.65 = USD1.Which one 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 AUD1.8679 = USD1.
• 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:

Unconscious Motivations

Drives and desires operating beneath the level of conscious awareness, influencing behavior according to psychoanalytic theory.

Enduring Traits

Stable and consistent characteristics that define an individual's personality over time.

Personality

The fusion of characteristics that outline an individual's distinctive personality.

Trait

A characteristic or quality that defines or distinguishes a person or thing.