What Is the Likely Cause of an Interest Rate Spread

question 18

Multiple Choice

What is the likely cause of an interest rate spread for similar assets denominated in the same currency?

• A) There is doubt that the currency's value will hold.
• B) It is due to the country risk where the assets are originated.
• C) It depends on the geographic difference between borrowers and lenders.
• D) It is because in some markets, the middlemen "take" more of a cut.

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Definitions:

Restricting Imports

Government policies aimed at reducing the number of goods and services that can be imported into a country to protect domestic industries.

Personal Income

the total earnings received by individuals from all sources before taxes, including wages, salaries, benefits, and investment income.

Labor Services

Work performed by individuals for wages or salary, especially in the context of the workforce contributing to economic output.

Euro

The official currency of 19 out of the 27 European Union countries, which is used as a common legal tender for transactions within this zone.