We Would Not Expect a Japanese Financial Asset and a U.S

question 30

Multiple Choice

We would not expect a Japanese financial asset and a U.S. financial asset with identical risk, liquidity, and information characteristics to have different expected returns because

• A)the U.S. and Japanese governments have pledged themselves to avoid this outcome.
• B)traders would buy the asset with the higher expected yield and sell the asset with the lower expected yield until the yields were brought into equality.
• C)traders would sell the asset with the higher expected yield and buy the asset with the lower expected yield until the yields were brought into equality.
• D)the exchange rate between the dollar and the yen would adjust automatically to eliminate any difference in yields.

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Definitions:

Expenses

Costs incurred by a business or individual in the process of earning revenue.

Owner Financing

A method of financing in which the seller of a property provides a loan to the buyer directly, often with flexible terms.

Creditors Or Lenders

Individuals or institutions that lend money or extend credit to others, with the expectation of being repaid with interest.

Revenues

The total amount of money received by a company for goods sold or services provided during a certain period of time.