For an American Investor,the Expected Rate of Return on European

question 9

Multiple Choice

For an American investor,the expected rate of return on European securities depends on all of the following factors except the:

• A) Rate of return on equivalent American securities
• B) The current exchange rate between the dollar and the pound
• C) Exchange rate anticipated to prevail when the securities mature
• D) Interest rate paid on European securities

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Definitions:

Option

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a certain date.

Money

A medium of exchange, unit of account, and store of value that facilitates transactions and measures the value of goods and services.

Worthless

Describes an item that has no value, utility, or financial gain.

Exercise Price

The specified price on an option contract at which the option holder can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.