Assume That the U

question 14

Multiple Choice

Assume that the U.S. one-year interest rate is 3% and the one-year interest rate on Australian dollars is 6%. The U.S. expected annual inflation is 5%, while the Australian inflation is expected to be 7%. You have $100,000 to invest for one year and you believe that PPP holds. The spot exchange rate of an Australian dollar is $0.689. What will be the yield on your investment if you invest in the Australian market?

• A) 6%
• B) 3%
• C) 4%
• D) 2%

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Definitions:

Evolutionary Psychologists

Researchers who study the psychological adaptations and traits that have evolved over time to solve problems of survival and reproduction.

Genetic Influences

The contributions of genes to a trait or condition, as distinguished from environmental factors.

Financial Security

The state of having reliable access to a sufficient quantity of affordable financial resources to maintain a desired lifestyle.

Evolutionary Psychologists

Scientists who study the mind and behavior through the lens of evolutionary theory, examining how evolutionary principles influence human thoughts, feelings, and behaviors.