If UIP Holds, Then Returns on Foreign Investments (The Carry

question 92

Multiple Choice

If UIP holds, then returns on foreign investments (the carry trade) would be:

• A) greater than 10%.
• B) equal to the return from investment plus the appreciation of the home currency.
• C) equal to the return from investment minus appreciation of the home currency.
• D) equal to the reciprocal of the appreciation of the home currency.

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Definitions:

Intelligence

A general cognitive capability that includes reasoning, problem-solving, planning, abstract thinking, complex idea comprehension, learning quickly, and learning from experience.

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