Assume That the Euro's Interest Rates Are Higher Than U

question 44

Multiple Choice

Assume that the euro's interest rates are higher than U.S. interest rates, and that interest rate parity exists. Which of the following is true?

• A) Americans using covered interest arbitrage earn the same rate of return as Germans who attempt covered interest arbitrage.
• B) Americans who invest in the U.S. earn the same rate of return as Germans who attempt covered interest arbitrage.
• C) Americans who invest in the U.S. earn the same rate of return as Germans who invest in Germany
• D) A and B
• E) None of the above

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